Do Parental Income Shocks Boost the Realization of Children’s Genetic Potential? Evidence from the UK Child Tax Credit Expansion.

Alicia García Sierra, University of Lausanne
Inés Echevarría García , Nuffield College, University of Oxford

A central challenge in the study of social inequalities is to understand how genetic factors and social environments interact to shape life outcomes. Existing research often treats socioeconomic status (SES) as a broad category, making it difficult to identify which specific SES component moderates the relationship between genetic endowments and life chances. This study isolates the role of parental income by exploiting the quasi-natural experiment created by the 2003 Child Tax Credit (CTC) reform in the United Kingdom, which altered family income exogenously based on pre-reform earnings and family composition. Using data from the Millennium Cohort Study, we estimate instrumental-variables difference-in-differences (IV–DiD) models to assess how policy-induced income changes affect the relationship between children’s polygenic indices for educational attainment and cognitive and developmental outcomes. The results indicate that exogenous increases in parental income modestly improve children’s cognitive outcomes at age five. However, the effects do not significantly vary by children’s genetic propensities, suggesting that additional income benefits children across the genetic distribution rather than amplifying existing inequalities.These findings contribute to research on gene–environment interactions and social inequality by demonstrating that policy-induced income gains can enhance early cognitive outcomes but do not appear to widen genetic disparities.

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 Presented in Session 115. Childhood Conditions and Human Capital Formation