Article, Refereed Journal
Does Debt Discourage Employment and Payment of Child Support? Evidence from a Natural Experiment
Substantial declines in employment and earnings among disadvantaged men may be exacerbated by child support enforcement policies that are designed to help support families but may have the unintended consequence of discouraging fathers’ employment. Disentangling causal effects is challenging because high child support debt may be both a cause and a consequence of unemployment and low child support order compliance. We used childbirth costs charged in unmarried mothers’ Medicaid-covered childbirths, from Wisconsin administrative records, as an exogenous source of variation to identify the impact of debt. We found that greater debt has a substantial negative effect on fathers’ formal employment and child support payments, and that this effect is mediated by fathers’ prebirth earnings histories.