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What is it about coming from an economically disadvantaged family that is driving these differences in young children's development and achievement? In the 1960s, the Coleman report brought the attention of the sociology field to the importance of the family context for school performance. At the same time, psychologists were focusing on the importance of early experience (and by definition, the family) on later development. Together, these two disciplines helped to shape the terms of President Johnson's War on Poverty, which directed attention to child and family interventions and how these might make a difference in lives of poor families.

In this chapter we discuss the importance of the family environment (including family income, parents' human capital, maternal emotional health, and parenting) as well as neighborhood context and how they may operate to link income and child outcomes. In our discussion, we draw upon our own and others' previous research from several different disciplines to illustrate these pathways. We provide several examples of how we have empirically examined these contextual components and their relation to children's development. We draw upon data from three la rge national datasets to address these issues: the Infant Health and Development Program (IHDP), the Panel Study of Income Dynamics - Child Development Supplement (PSID-CDS), and the National Longitudinal Study of Youth - Child Supplement (NLSY-CS).