Family First or the Kindness of Strangers? Foster Care Placements and Adult Outcomes

Abstract

Foster care youth are a large population that have reliably been shown to be at high risk of poor adult outcomes that are costly to both former foster youth and the public. We evaluate the effects of placing foster children with extended family, rather than unrelated caregivers, using individual-level panel data. Our analysis utilizes an instrumental variable identification strategy that uses monthly compensation rates to mimic randomization in placement type to estimate the effects of placement in kinship foster care relative to traditional foster care. We find kinship care conveys significant benefits in the form of improved life outcomes at age 21. Former foster youth that were placed with kin are more likely to be employed or enrolled in formal education, and less likely to participate in public assistance programs, suffer from homelessness, or be incarcerated. Our findings are highly significant from both a practical and a statistical perspective and hold across a wide range of specifications. We posit that kinship care may better maintain ties between youth and family members that are vital in the transition to successful adulthood.

Keywords: Foster care, adult outcomes, family ties, instrumental variable

JEL Classification: I38, J13, H75