Children Raised in Foster Families Have Better Early Adult Outcomes
than Those Raised in Institutions
by Anna Bárdits and Gábor Kertesi
Children who are severely neglected, at risk, or abused can be removed from their families by the state, which then takes on the responsibility of raising them. In the European Union, around 1 percent of children—about 770,000 children, including roughly 20,000 in Hungary—live in state care. The goal of state care is to provide temporary care until the child can either return to their family or be adopted. In practice, however, biological parents often cannot resolve the problems that led to removal, and it is very difficult to find adoptive families for children over the age of three. As a result, many children spend long years in the child protection system and often leave it only as adults.
There are two main forms of state care: residential institutions and foster families. After World War II, large numbers of children were left without parents and were severely traumatized. Their upbringing was mainly taken on by newly established state-run institutions. This institutional form of care dominated the upbringing of children in state care in Europe for decades. Later, professionals in child protection increasingly came to the view that it is better for children to grow up in an environment that resembles a family, rather than in institutions. In English-speaking countries, this shift has largely taken place: children in state care are placed with foster families whenever possible. In the European Union, however, 40 percent of children in state care (more than 300,000 children) still live in residential institutions. One important reason is that it is difficult and expensive to recruit and support a sufficient number of trained, suitable foster parents. In Hungary, experts estimate that around 2,000 foster parents are missing from the system.
Since the cost per child of institutional care is much higher than that of foster family care—by at least 30 percent in Hungary, according to expert estimates—it would be possible to cover the increased expenditure for foster parents even without increasing the overall child protection budget (although such an increase would be justified). Our study provides additional arguments relevant to this cost–benefit consideration.
We show that the type of care environment leads to substantial differences in how children in state care manage the transition to adulthood. Until recently, there was little convincing international evidence on this. In particular, we knew very little about what happens when adolescents are placed in foster care versus institutions, because most previous research focused on infants and young children. Using Hungarian data, we show that adolescents who grew up in foster families begin their adult lives with significantly better chances than comparable children who grew up in institutions. In our analysis, we compare children who, at age 13, had similar cognitive and non-cognitive abilities and similar mental health, but one group grew up in foster families while the other grew up in institutions.
By age 19, those raised in foster families are 8 percentage points more likely to complete secondary school and 11 percentage points more likely to be working or studying for most of the year, compared to similar children raised in institutions. They are also 6 percentage points less likely to require medication for mental health problems. Among girls, the likelihood of teenage childbirth and the likelihood of abortion are both 12 percentage points lower. Using Oster bounds, we show that these estimates are not merely conditional correlations; it is also plausible that foster care causes better outcomes.
Our results have important implications for child protection policy in the European Union. If EU countries, including Hungary, were able to reduce the share of institutional placements to around 15 percent—the level seen in many English-speaking countries—then approximately 190,000 children would need to be placed with foster families. The task is substantial, and so are the consequences. Our findings suggest that it would make a meaningful difference for the development and life chances of children who are removed from their families.
The original version of this article appeared on the Telex Defacto blog in Hungarian.
New publication:
Bárdits, A., Kertesi, G.
Family foster care or residential care: the impact of home environment on children raised in state care.
Journal of Population Economics 38, 74 (2025)
https://doi.org/10.1007/s00148-025-01129-9
