1. Economic Incentives and Foster Child Adoptions Economic Incentives and Foster Child Adoptions Laura Argys and Brian Duncan Department of Economics University of Colorado at Denver Laura Argys and Brian Duncan Department of Economics University of Colorado at Denver Funded by The National Institute of Child Health and Human Development (1 R03 HD049867-02)

2. Introduction BackgroundBackground In 1998: There were approximately 560,000 children in foster care. 122,000 were waiting to be adopted. 36,000 exited foster care due to adoption. Adoption rates vary considerably. Similar among boys and girls. Higher among younger children. Black children have the lowest adoption rates. Lower for those placed with single foster parents and those placed with relatives.

3. Theoretical Framework The Path Through Foster Care Home Setting Foster Care Reunification Adoption (2.9% overall) (20% of eligible) Removal (2.7 years) (14%) About 24% exit foster care each year Relatives (3.1%) Age Out and Other (4%)

4. Theoretical Framework Key Legislation 1. Adoption Assistance and Child Welfare Act of 1980. “ Reasonable efforts” to prevent removals. Provide services for families in crisis. Established adoption assistance payments. Guideline definition of special needs. 2. The Multiethnic Placement Act of 1994 and the Interethnic Adoption Provisions of 1996. Remove barriers to interracial adoption. Move children of color to permanent families. 3. Adoption and Safe Families Act of 1997. “ Fast track” to permanency. Removed the “reasonable efforts” requirement. Expedite the termination of parental rights.

5. Literature Review Previous Studies 1. Medoff (1993). Adoptions and female labor force participation. 2. Gennetian (1999). Abortion access and adoptions. The Supply of Adoptions:

6. Literature Review Previous Studies 1. Thompson et al. (2001). An evaluation of the child welfare system in Washington State. Adoption subsidy increased foster family adoptions. 2. Avery and Mont (1992). Data on adoption in New York State. Children with mental disabilities who qualified for greater adoption subsidies faced a greater probability of adoption. Subsidies had no effect on the adoptions of other special needs children. 3. Hansen and Hansen (2005). Aggregate data from the 1996 AFCARS (at the state level). A positive association between the monthly adoption subsidy for nine year-olds and the total number of children (per 100,000 state population) adopted out of foster care.

7. Theoretical Framework The Costs and Benefits of Adoption Benefits: Permanency. Emotionally and psychologically desirable (Mulligan, 2003). Costs: Financial consequences. Monthly foster care payments. Monthly adoption assistance payments. Legal costs, liability, education, medical... Foster parents weight the benefits and costs

8. Theoretical Framework Research Question Do adoption subsidies increase adoptions? Foster children Adoption assistance payments (1980) Variation: across state / within state Lowered the cost of adoption

9. Theoretical Framework How To Calculate Costs Adoption is dichotomous In most state, foster care payments and adoption subsidies vary by age. Are parents forward looking? Cost in present value., the timing is not.

10. Monthly Subsidies Figure 1: Average Foster Care and Adoption Subsidies, by Child’s Age (A) Monthly Payments Foster Care Payments Adoption Payments (A) Monthly Payments (B) Net Present Values

11. Figure 1: Average Foster Care and Adoption Subsidies, by Child’s Age (A) Monthly Payments (B) Net Present Values $361 $386 $25 $41,406 $44,257 $2,859 Monthly Subsidies Foster Care Payments Adoption Payments

12. Figure 2: Foster Care and Adoption Subsidies in Four Selected States, by Child’s Age A. Monthly Payments 1. Minnesota 2. New Jersey Foster Care Payments Adoption Payments Foster Care Payments Adoption Payments A. Monthly Payments 1. Minnesota2. New Jersey Monthly Subsidies A. Monthly Payments 4. California 3. South Carolina Foster Care Payments Adoption Payments

13. The AFCARS Data DataData The 1998 Adoption and Foster Care Analysis and Reporting System (AFCARS) Version 6 Data Basic information on all children in foster care in 43 states. Our Sample: Children 16 and under who were eligible for adoption in 1998. Exclude: children in supervised independent living, in trial home visits, in group homes or institutions, or who have runaway. Children in an additional fifteen states were dropped because of missing data. Our sample: 81,980 children living in 29 states.

14. (A) Children Eligible for Adoption(B) Adoption Rates Boys Girls Children Eligible for Adoption and Adoption Rates in 1998 Basic Patterns

15. Children Eligible for Adoption and Adoption Rates in 1998, by Child’s Age Children Eligible for Adoption and Adoption Rates in 1998, by Child’s Age (A) Children Eligible for Adoption(B) Adoption Rates BoysBoysGirls Basic Patterns

16. Children Eligible for Adoption and Adoption Rates in 1998, by Child’s Race Children Eligible for Adoption and Adoption Rates in 1998, by Child’s Race (A) Children Eligible for Adoption(B) Adoption Rates BoysBoysGirls Basic Patterns

17. Children Eligible for Adoption and Adoption Rates in 1998, by Foster Parent's Race Children Eligible for Adoption and Adoption Rates in 1998, by Foster Parent's Race (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

18. Children Eligible for Adoption and Adoption Rates in 1998, by Child's Disability Children Eligible for Adoption and Adoption Rates in 1998, by Child's Disability (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

19. Children Eligible for Adoption and Adoption Rates in 1998, by Child's Reason for Removal Children Eligible for Adoption and Adoption Rates in 1998, by Child's Reason for Removal (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

20. Children Eligible for Adoption and Adoption Rates in 1998, by Foster Parent's Age Children Eligible for Adoption and Adoption Rates in 1998, by Foster Parent's Age (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

21. Children Eligible for Adoption and Adoption Rates in 1998, by Placement Type Children Eligible for Adoption and Adoption Rates in 1998, by Placement Type (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

22. Children Eligible for Adoption and Adoption Rates in 1998, by Foster Family Structure Children Eligible for Adoption and Adoption Rates in 1998, by Foster Family Structure (A) Children Eligible for Adoption(B) Adoption Rates BoysBoys Girls Basic Patterns

23. Adopt kji =  +  X kji +  S kj +  k +  j +  kji Adopt kji is a dichotomous variable equal to one if child i of age j in state k is adopted, and zero otherwise. The vector  k controls for state specific effects, and the vector  j controls for age specific effects. The vector X kji represents set of control variables. The vector S kj includes the foster care and adoption subsidy variables. Empirical Specification Logit Regression Specification Adopt kji  k X kji S kj Adopt kji  k  j  j X kji S kj

24. The definition of S kj Empirical Specification Foster Care & Adoption Subsidy Variables (1) S kj = {FC ki, AD ki } (2) S kj = {AD ki - FC ki } The amount a foster parent must give up to adopt their foster child.

25. Logit Regression Results Table 4: Marginal Effects on the Adoption Rate of Eligible Children, by Child’s Gender Standard errors are shown in parentheses. Statistically significant at the *** 99%, ** 90%, and * 90% confidence level. All regressions include state fixed effects.

26. Placement Type Boys Girls Pre-Adopt Relative Family Married Couple Single Foster Family Structure Boys Girls Basic Patterns

27. Logit Regression Results Standard errors are shown in parentheses. Statistically significant at the *** 99%, ** 90%, and * 90% confidence level. All regressions include state fixed effects. Table 4 (continued): Marginal Effects on the Adoption Rate of Eligible Children, by Child’s Gender

28. Logit Regression Results Table 5: The Marginal Effect of Lowering the Cost of Adoption by $100 per Month, by Child’s Gender

29. Logit Regression Results Table 5 (continued): The Marginal Effect of Lowering the Cost of Adoption by $100 per Month, by Child’s Gender

30. Logit Regression Results Table 5 (continued): The Marginal Effect of Lowering the Cost of Adoption by $100 per Month, by Child’s Gender

31. Logit Regression Results Table notes: Statistically significant at the ***99%, **95%, and *90% confidence levels. Standard errors clustered by state/age group in parenthesis. All regressions include state fixed effects. Table 5 (continued): The Marginal Effect of Lowering the Cost of Adoption by $100 per Month, by Child’s Gender

32. Conclusion Main Findings A $100 Reduction in the Cost of Adoption 6.2–percentage point increase for boys. 2.9–percentage point increase for girls. 31% increase. 14% increase.

33. Conclusion Main Findings Black foster children have a low adoption rate because they are more often placed with single foster parents and/or in kinship care. Lowering the cost of adoption increases adoption rates of all children. Lowering the cost of adoption has the largest impact on the children with the lowest adoption rates. Older children. Children placed with single foster parents. Children placed with relatives. Children with behavioral problems.

34. Future Work The timing of adoption Parents rights terminated  Adoption. December adoptions.

35. Future Work December Adoptions