The Value of Social Investments: Disentangling Preferences for Outcomes and Processes Semra Özdemir June 24, 2010 Camp Resources, NC

The Problem Benefits of reducing poverty – Less crime, substance abuse, teenage pregnancy – Improved workforce productivity – Altruistic values Barriers to poverty-reduction interventions – Skepticism about effectiveness of interventions – Ideology and general distrust of government Analogy to green products: people care about both “what” and “how”

What are we planning to do?  Estimate the willingness of US households to pay to reduce childhood poverty  Identify and quantify how values are affected by:  Altruistic preferences  Ideology and process preferences  Behavioral-economic factors

How are we going to do this?  Survey a few thousand individuals from Knowledge Networks’ nationally representative web-based panel  Ask these respondents two kinds of stated preference questions (choice experiment & contingent valuation method)  Conduct a field experiment

What have we done so far?  Held focus groups in Raleigh, Chicago, Dallas  Developed a survey instrument with both choice experiment and contingent valuation questions  Tested the survey instrument with respondents in 15 in-person interviews  Piloted the survey instrument with 307 respondents in Web-based interviews

Heckman Results  Early human-capital investments from birth to age five produce the greatest returns  We develop cognitive and soft skills during the first 5 years of our lives that affect our adult lives

Choice of Object  Early child care programs that target 0-5 year old children in at-risk families  Example programs  Perry Preschool Program  Carolina Abecedarian Program

Possible Experimental Controls on Process Factors Institution options – Federal, state, or local government – Religious, nonprofit, or for-profit organizations Payment-vehicle options – Total taxes – Reallocation of taxes – Voluntary donations – Matching, rebate, provision-point mechanisms Money or time donations

Thank you!

Possible CV question A Dichotomous CV question: Would someone commit $X/month for a year to put one child through an early child care program for a year? Follow-up certainty question Provision Point: $XXX is the minimum amount to start an early child care program. Money back guarantee if provision point is not reached.

Possible Questions Hypothetical versus actual payments Local versus national sample for a program in NY city or another major city

Pilot CV Question Suppose that Congress was considering funding programs to reduce child poverty with a minor role for state and local governments in administering the programs and a major role for local, private groups (such as churches, synagogues, and charities). If this program passed, suppose that your total taxes would increase by $X per year. Remember that your total taxes include federal, state, sales and property taxes. Please indicate whether you would want your representatives in Congress to vote for or vote against funding programs to reduce child poverty by 50%.  Definitely want them to vote “YES” to fund programs to reduce child poverty  Probably want them to vote “YES” to fund programs to reduce child poverty  Probably want them to vote “NO” to fund programs to reduce child poverty  Definitely want them to vote “NO” to fund programs to reduce child poverty  Not sure how I would want my representatives to vote

Legislation Choice: Percent Supporting vs. Tax Level by Political Ideology