Economic Incentives and Foster Child Adoption

Laura M. Argys, University of Colorado at Denver
Brian Duncan, University of Colorado at Denver

In 1998, over 286,000 children entered the foster care system. Many of these children were reunited with biological parents, or quickly adopted. However, a significant number faced long-term foster care, some of whom were eventually adopted by their long-term foster parents. A foster parent’s decision to adopt a foster child carries significant economic consequences—forfeiting foster care subsidies and assuming responsibility for medical and educational expenses, to name a few. Since 1980, states began offering adoption subsidies to offset some of these expenses, effectively lowering the cost of adoption. This paper presents empirical evidence on the role of economic incentives in a foster parent’s decision about when, or if, to adopt a foster child. We find that lowering the cost of adoption increases adoptions overall, particularly among children with the lowest adoption rates. These children tend to be older, have behavioral problems, and live with single foster parents or with relatives.