Poverty is associated with a litany of negative outcomes…. For example: low educational attainment, high crime, poor health, food insecurity, high stress, homelessness, and more.
But the correlation between poverty and these outcomes is not sufficient to prove a causal link. It may be that a common ancestor causes both poverty and the associated “poverty bundle” or that causality goes the other way around.
Bruce Sacerdote tracks adopted children who are randomly assigned to families to test the effect of parental characteristics on child outcomes. Parental income is highly correlated with biological child income, but has zero effect on adopted child income. Parental educational attainment has some transmission to adopted children, but much smaller than for biological children. Other outcomes like smoking, drinking, and obesity are about the same.
Cesarini et al. have another study of Swedish lottery winners that finds zero effect of income on criminal behavior, even though the cross-sectional relationship is large.
Sending money to those in need increases their consumption and leisure, which is valuable in its own right. But the evidence suggests that giving people more resources won’t solve all the other problems associated with poverty, at least in the developed world.
Source: Maxwell Tabarrok