Financial Incentives for Adoption and Kin Guardianship Improve Achievement for Foster Children

This paper reports new evidence that giving financial rewards for adopting a child from foster care or becoming a kin guardian improves the later school performance of these children. It uses linked administrative data to examine a policy change in Minnesota. This change increased the payments to adoptive parents and kin guardians for children ages 6 and older, making them equal to what foster care payments were, but didn't raise payments as much for younger children. Difference-in-differences analysis shows that this policy of equalizing payments increased the average academic achievement of foster children by 31 percent of a standard deviation three years after their cases began. Additionally, the policy raised the total value of payments to these children by about $2,000 during this period. It also led to a 29 percent increase in the monthly chance of moving from foster care to adoption or kin guardianship, improved school stability, and reduced school suspensions. This research contributes to the limited evidence on how financial incentives can encourage adoptions and is one of the first to provide evidence of its positive effects on outcomes beyond the child welfare system.