Improving infant health—and lifelong outcomes—with cash

In 2021, 8.5 percent of babies born in the United States had low birth weight, defined by the Centers for Disease Control and Prevention as a newborn weighing less than 5 pounds, 8 ounces. Many of those 312,000 infants experienced health complications: breathing problems, difficulty eating, inability to stay warm, infection, brain bleeds.

But the consequences of low birth weight are not limited to infancy or to health. In a study of low birth weight and socioeconomic status, Institute advisor Janet Currie and her co-authors write that their most striking finding is that the effects of low birth weight persist well into adulthood. A later study, co-authored by Institute advisor Rucker Johnson, finds that at age 5, low birth weight is associated with lower math and reading scores. As adults, these individuals’ earnings are around 15 percent lower than those of individuals born with birth weights in the normal range.

Many factors increase the likelihood of low birth weight, including multiple births and maternal age under 20. But environmental factors matter too. Fetuses were once called “perfect parasites,” thought to be protected from the harms of the outside world by the placenta. That view changed when miscarriage rates increased in the early 1960s due to a new anti-nausea medication (with tragic side effects) and maternal smoking. Since then, scientists and economists have cast their attention to the in utero period, finding that a variety of environmental factors, including maternal nutrition and stress during pregnancy, have the potential to influence low birth weight and thus affect both the short- and long-term health and well-being of individuals.

This makes finding interventions that could reduce the share of babies born with low birth weight a valuable prospect. New research by former Institute visiting scholar Krista Ruffini studies perhaps the simplest intervention of all: cash payments during pregnancy.

Capitalizing on two different cash transfer programs aimed to support individuals and stimulate the economy during the COVID-19 pandemic, Ruffini measures the impact of these large-scale, unconditional cash transfers on infant health.

Her results are striking: An additional $1,000 received during pregnancy reduced the prevalence of low birth weight by 1.7 percentage points, a reduction of 20 to 30 percent. This result holds for mothers of different racial and ethnic identities and income levels. These findings offer compelling evidence that financial investment at the earliest stages of development can improve the prenatal environment, an investment that will pay off for a lifetime.

A pandemic policy experiment

The emergency created by the COVID pandemic spurred the U.S. government to accomplish something it is not well known for: speedy and frequent cash payments to the vast majority of households. Ruffini’s research focuses on two income assistance programs, the economic impact payments (EIP) and the expansion of the child tax credit (CTC), which all American households below the income thresholds were eligible for.

“One thing the U.S. did [during the pandemic] that was really innovative was give a lot of income assistance to families in a timely manner,” Ruffini said. “The way that these policies were designed provides what economists call a nice natural experiment, in which very similar families were getting different amounts of money based on characteristics that they had before the pandemic started and that they couldn’t anticipate when the pandemic began.”

The stimulus payments set up a nice natural experiment in several ways. First, EIP and CTC payments went out to families regardless of their employment status. In the U.S., assistance to lower-income households, such as the earned income tax credit, often depends on employment. This makes it difficult to separate the effect of the cash from the effect of changes to employment.

Second, families did not need to apply to receive the payments, with the result that somewhere around 85 percent of families received them, an extraordinarily high number. In contrast, most social assistance programs, including the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), require applications. The restrictive eligibility requirements plus the application barriers make it difficult to see how the impact might generalize to the population at large.

Third, the time that elapsed between the legislation authorizing the stimulus payments and when the checks were in the mail was too short to create what economists call “anticipation effects,” when people change their behavior in advance of an upcoming policy change. If knowledge of future stimulus payments changed who decided to have a baby, it would be hard to say how the payments impacted birth weights.

Finally, for all households below the income thresholds, the amount of money pregnant women received varied only with their household size in the previous year. Figure 1 illustrates this variation. If there were no variation—if everyone got the same payments—then there would be no way to isolate the effect of the payments from other factors, such as the fact the country was in recession or was in the middle of a pandemic of a novel virus.

More cash, fewer low-weight babies

In order to measure the impact of the cash payments, Ruffini analyzed restricted-use birth record data for every baby born in the United States in 2020 and 2021. The data include parental demographic characteristics and county of residence, number of previous births by the mother, and measures of infant health. Because babies of multiple births are more likely to have low birth weight, Ruffini restricts her analysis to single births and to mothers who were born in the United States.

To isolate the impact of the cash, Ruffini compares the birth weights of babies born under as similar conditions as possible—same month, same county, same maternal demographics—except for the number of older siblings the baby has. Because stimulus payments are not recorded in the dataset, Ruffini infers how much the mother received during pregnancy based on when the baby was born and the number and ages of previous children. Figure 2 illustrates this comparison.

Ruffini found that cash payments received by pregnant women do improve infant health—in a substantial way. Her analysis suggests that an additional $1,000 in stimulus payments reduced the prevalence of low birth weight by 1.7 percentage points on average. To put that in perspective: Giving $1,000 to expectant mothers would mean around 62,000 fewer babies born with low birth weight in the United States every year.

To confirm the validity of her finding, Ruffini looked at other outcomes that capture an infant’s health as well, including Apgar scores (system for assessing an infant’s condition at birth), very low birth weight (babies weighing less than 3 pounds, 4 ounces), and preterm birth (babies born before 37 weeks). In each case, Ruffini’s analysis finds that additional cash payments mattered by improving Apgar scores and reducing the prevalence of very low birth weight and preterm births.

The timing of the payment is also important. While cash payments at any time during pregnancy improved infant health, payments received later had more impact. In fact, payments received during the third trimester resulted in at least twice the benefit as payments received in earlier months. In other words, an additional $1,000 to pregnant mothers in their third trimester would result in about 139,000 fewer babies born with low birth weight every year.

Interestingly, Ruffini does not find that the impact on infant health varies much with characteristics of the mother or her household. Her analysis does not find a sizable difference in infant health between mothers who were married and mothers who were not. The impact is slightly larger for mothers with no more than a high school education and those who received Medicaid or WIC, but only by a little. This finding strongly suggests that for many households outside of those with very high incomes, additional cash during pregnancy makes a difference.

A cost-saving benefit

It’s emotionally difficult to put a price on infant health. But when considering one policy amid the panoply of options, it’s useful to compare their costs and benefits. While a complete cost-benefit analysis of large-scale, unconditional cash payments to pregnant mothers has not yet been done, there is reason to think the financial benefits could outweigh the costs.

One immediate benefit: Infants with birth weights in the normal range are less likely to need to stay in a neonatal intensive care unit. “My estimate is that for every $100 that we sent to families, we saved $26 in initial hospitalization costs,” Ruffini said. “That’s not a full cost-benefit analysis, but it does show that even in the first couple months of life, a pretty substantial fraction of the program’s costs were offset by savings in short-term medical care costs.” Because low birth weight is correlated with a variety of negative outcomes over the course of an individual’s life, Ruffini points out, we should expect to see benefits in the future too.

The size of the impact of unconditional cash to pregnant mothers also compares well with other forms of assistance. “I find the effects of the stimulus payments are pretty similar per $100 to what we saw with the introduction of food stamps in the 1970s and with families that were newly eligible for Medicaid in the 1980s,” Ruffini said.

Of course, a lot has changed in the economy since the ’70s and ’80s. “Maybe the most apples-to-apples comparison is to the earned income tax credit. I find effects that are much larger than what we see from the annual lump-sum EITC payments, on the order of five or six times larger per dollar spent.”

Why cash matters

That more money improves outcomes is a fairly intuitive finding. And yet, the welfare system in the United States has moved decidedly away from cash assistance over the last 40 years. While government-funded health insurance and tax credits benefiting low-income working parents have increased, for many of the neediest families, benefits are in kind, not in cash.

It’s useful, then, to identify just why cash helps. “I think we have good evidence that cash is helpful,” said Institute economist Andrew Goodman-Bacon, who has studied the long-term impacts of Medicaid’s introduction in the 1960s. “But we need to connect specific, negative exposures that impact birth weight to what the cash helps a mom do.”

To help identify the specific ways in which cash helps expectant mothers, Ruffini looked at the Census Bureau’s Household Pulse Survey, which asked respondents how they had spent the stimulus checks. She finds evidence that cash helps both directly, by providing resources to purchase goods and services that directly impact neonatal health, as well as indirectly, by reducing stress over finances.

“It looks like families were using the money first to spend down their debt, like paying off their credit cards, and second, to procure essential items—things like food, shelter, and rent,” Ruffini said. At a particularly challenging moment for many households, then, the stimulus payments provided families with the resources to make ends meet.

More specifically, survey responses show that mothers receiving an additional $1,000 in stimulus payments went to more prenatal doctor visits and were less likely to smoke in the third trimester. Maternal smoking is highly correlated with low birth weight. It is also correlated with maternal stress: “When moms are less stressed, they’re less likely to smoke,” Ruffini said.

Ruffini’s findings provide useful context for ongoing discussion around guaranteed basic income programs, which are increasingly popular at the local level. About 45 such programs are now active in U.S. localities, including Minneapolis, and at least 30 more are in planning phases.

“The overarching question of how additional resources affect family well-being is something that has interested economists and researchers in public health for a really long time,” Ruffini said. Future research on these programs as well as the EIP and CTC payments will advance understanding of the specific ways in which unconditional, frequent, and widespread cash payments impact our children.