Why Do U.S. Parents Prefer Private to Foster Care Adoptions? The Role of Adoption Subsidies, Gender, Race, and Special Needs

Abstract

We analyze the demand behavior of adoptive parents in the U.S.A. For the theory, we apply vertical product differentiation to characterize the demand for domestic private, foster care and international adoptions. Then, we use the 2007 U.S. National Survey of Adoptive Parents and apply the control‐function approach to a mixed logit model. We find interesting insights into the relationship between adoption choices and an adoptive parent's preferences over gender, race, and special needs. The government needs to pay an additional $735 ($506) a month to make a parent feel indifferent between international (domestic private) and foster care adoptions. (JEL O12, D10, L13)