The authors evaluate the effects of home inputs on children’s cognitive development using the sample of single mothers from the National Longitudinal Survey of Youth (NLSY). Important selection problems arise when trying to assess the impact of maternal time and income on children’s development. To deal with this, they exploit the (plausibly) exogenous variation in employment and child care use by single mothers generated by differences in welfare regulations across states and over time. In particular, the 1996 welfare reform act along with earlier state policy changes adopted under federal waivers, generated substantial increases in work and child care use. Thus, the authors construct a comprehensive set of welfare policy variables at individual and state levels and use them as instruments to estimate child cognitive ability production functions. They use local demand conditions as instruments as well.