Temporary Stays and Persistent Gains: The Causal Effects of Foster Care

Six percent of children in the United States enter foster care by age 18. We estimate the effects of foster care on children's outcomes by exploiting the quasi-random assignment of child welfare investigators in Michigan. We find that foster care improved children's safety and educational outcomes. Gains emerged after children exited the foster system when most were reunified with their birth parents, suggesting that improvements made by their parents were an important mechanism. These results indicate that safely reducing the use of foster care, a goal of recent federal legislation, requires more effective in-home, prevention-focused efforts. (JEL H75, I21, J13, K42)