The decision to adopt a non-biological child is a function of both altruistic motives and financial incentives (Testa and Rolock, 1999). We present new evidence on the degree to which financial incentives complement adult willingness to take foster children into permanent care. Leveraging rich administrative data from Minnesota and a unique policy experiment, we show that equalizing the payments between foster care and permanency decreases the length of foster care episodes without harming the stability of the placement. Our hazard analysis suggest that state foster care systems use monetary incentives to meet their goals of increasing timeliness to permanency while both decreasing their long term financial obligations, with no evidence that those placements are more likely to be dissolved causing the child to re-enter foster care.
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