"The Effect of Paying Parents to Adopt: Evidence from Minnesota's Foster-Care System"
Abstract. Aimed at increasing the adoption rate of older children, Minnesota's 2015 Northstar Care Program eliminated the adoption penalty (i.e., the decrease in fostering-based financial transfers associated with adoption) for children aged six and older, while maintaining it for children under age six. Using a difference-in-differences estimation strategy that controls for a rich set of covariates, we find that parents were responsive to this change in direct financial payments; the annual adoption rate of older foster children (aged six to eleven) increased by approximately 8 percentage points (24% at the mean) as a result of the program. We additionally find evidence of strategic adoption behavior as the adoption rate of younger children temporarily increased by 9 percentage points (22% at the mean) in the year prior to the program's implementation.