Dr. David Blau, SBS Distinguished Professor, Economics, Ohio State University

Children in the United States who are raised in a stable household headed by their married biological parents have higher cognitive achievement and fewer behavior problems on average than do children raised by a single parent, cohabiting parents, or one biological and one stepparent. These differences are often quite large, and they have persistent consequences in adulthood. An important question in the large literature on this issue is the degree to which a causal interpretation of these associations is warranted. We contribute to this literature by specifying and estimating a forward-looking model in which women make sequential decisions on union formation, union dissolution, and employment. These choices interact with a stochastic fertility process to determine the family structure experiences and transitions of children from birth to age 18. Family structure affects child outcomes in the model via a home production function. Outcomes experienced during childhood influence subsequent adult outcomes, such as educational attainment. We estimate the model by Simulated Maximum Likelihood using data from the National Longitudinal Survey of Youth, 1979 cohort. Preliminary results provide suggestive evidence that (1) union formation, union dissolution, and employment decisions made by women are influenced by the anticipated consequences of these decisions for children, (2) observed and unobserved heterogeneity account for a large part of the association between family structure and child outcomes, but (3) divorce and entry of a stepfather into a child’s household at certain ages have negative effects on child outcomes.