The Economics of Investing in Early Childhood

1. The Economics of Investing in Early Childhood Pedro Carneiro University College London, Institute for Fiscal Studies, Centre for Microdata Methods and Practice June 2010

2. Can early childhood experiences explain SES gaps in college attendance?

3. But Family Income Does Not Matter, After Controlling for Ability and Family Factors

4. Main Predictor of College Attendance are Cognitive Skills

5. Therefore: • In the US, family income at age 17 is not the main reason why the poor attend college much less than the rich • The poor do not attend college mainly because they have poor preparation • To understand the preparation gap we need to start in early childhood: there are striking gaps in cognitive development between poor and rich at early ages • The root of these problems (and many others) may well be in early childhood

6. Current Thinking in Economics • Large rates of return of investing in early childhood. The evidence/calculations are mainly for disadvantaged children. • Increase in schooling and productivity, reduction in delinquent behavior and crime, reduction in welfare dependance • Efficient AND Equitable Investment: investing in poor children saves money! • These returns are vastly superior to returns to investing in the skills of disadvantaged adolescents and adults (e.g., public job training programs) – shift resources?

7. The Technology of Skill Formation and CHCC • Skill development starts in the womb – CHCC starts in the pre-natal period • Skill development requires integrated approach: families/parenting, health, schools, firms – CHCC is an integral approach • There are multiple skills that are important – CHCC addresses full development of the child • Skills are not infinitely plastic – CHCC targets individuals when learning potential is greatest • Need continuous investment over time – CHCC has life-cycle perspective of investments

8. Adult Skills are the result of a lifetime of investments • Start in utero (development of brain) • It is remarkable how events in utero or shortly after birth can have long lasting consequences • Continue well beyond the school years. • Most of our productive skills are acquired on the job. • There is a strong link across stages of a person’s life – requires integrated view of education policy over the life-cycle. The effectiveness of adult investments depends on history of past investments.

9. Influenza Pandemic – Fall 1918

10. Maternity Leave in Norway

11. Multiple Skills • Considerable emphasis on cognitive achievement. Much less emphasis on other types of skill (say, non-cognitive), such as: persistence, discipline, patience... • But these other types of skills: • Are important for a wide range of measures of adult success • Can be affected by interventions

12. Ex: GED (High School Equivalency for Dropouts)

13. GEDs do poorly in labor market

14. GEDs are troublemakers

15. Schools, Firms... And Families • Parental education, family income, family structure, and similar variables, are the best predictors of school performance. • Much of social policy tries to compensate for adverse family environments. • How to involve families in education policy? • Challenge for poor children: • Center Based – Perry Pre-School (Sure Start) • Home Visits – Jamaica • ... • Nadie Es Perfecto and other components of CHCC

16. Gaps in Cognitive Skills by SES Emerge Early and Persist

17. Gaps in Non-Cognitive Skills by SES Emerge Early and Persist

18. Plasticity – Sensitive and Critical Periods of Learning • There is some plasticity in the ability to learn at different ages, but it is very far from infinite. For some skills, sensitive and critical periods of learning occur very early in life. • Several examples from humans and animals: • Early Affiliative Bond Disruption in Monkeys (maternal removal at 1 and 6 months) • Intensive Early Grooming of Rats • Language Acquisition • Cataracts in Mammals (change in brain architecture)

19. Evidence from Social Programs • Different degrees of plasticity for different skills. IQ fairly stable very early in life and hard to change. Aspects of behavior more malleable until later ages. • We observe this in early childhood and adolescent interventions (enormous gains on crime prevention, and engagement in risky behaviors; more limited gains on cognition). • If we do not want to miss critical and sensitive periods of learning then invest early. If we miss them, some things can still be remediated, but behavioral skiils seem more malleable than cognitive skills. • Yet another argument for emphasizing the importance of non-cognitive skills.

20. Skill Begets Skill • Adult learning builds on learning in adolescence, which in turn builds on learning in childhood: investments early in life increase the productivity of later investments. • Flip side: if skill is not accumulated early on then the costs of remediation can be (prohibitively?) high – it is difficult to learn if there is not a solid ground on which to build. • Conversely, investments early in life will not flourish if they are not followed up by subsequent investments.

21. Evidence (some examples) • Early skills increase product of later investments: • Returns to education higher for high ability children. True in US, Sweden, Norway. UK? • Private job training is taken up by the most educated and able works in the firm (true in UK, US). These are the workers for whom returns are likely to be the largest. • But need to follow up early investments: • Head Start

22. Head Start – No Effects for Blacks?

23. No... Much Larger Fade-Out for Blacks (who attend poor schools)

24. Example: Perry Pre-School (ages 3-5; part day/school year, 1962)

25. Perry Pre-School: Education

26. Perry Pre-School: Economic Effects at 27

27. Perry Pre-School: Arrests by Age 27

28. Rate of Return to Perry Pre-School

29. Summary • TAKE ADVANTAGE OF MALLEABILITY • BUILD STRONG FOUNDATIONS FOR FURTHER LEARNING • PREVENT EARLY DAMAGE / AVOID LOSS OF POTENTIAL WHICH CANNOT BE REMEDIATED INVEST STRONGLY IN EARLY CHILDHOOD PROGRAMS, EVEN IF PAYOFF IS ONLY 20+ YEARS FROM TODAY