Living environments and child development: Comparing two groups of out-of-home children

Using unique data on 210 Korean children from surveys and experiments, this paper examines whether living environments matter for child development. We compare two groups of out-of-home children in different environments: traditional orphanage-type institutions and family-like group homes. We exploit the arguably random assignment of children to institutions, generated by variation in the relative availability of group homes across regions over the years. We find that children in group homes are more altruistic, emotionally stable, satisfied with school, and forward-looking. Our findings suggest that family-like environments with fewer coresidents and more intimate relationships are beneficial to children separated from their parents.