Investing in Disadvantaged Young Children Is Good Economics and Good Public Policy Flavio Cunha University of Pennsylvania Business Leadership for America’s Youngest Citizens: The Economic Promise of Investing in Early Childhood Overland Park, Kansas, April 17, 2008 This Research Is Supported By The Partnership For America’s Economic Success

2/15/20162 The Argument in a Nutshell 1 - Many major economic and social problems such as crime, dropping out of high school and drug consumption can be traced to low levels of skill and ability in the population.

2/15/20164 The Argument in a Nutshell Continued 2 - Ability gaps between the advantaged and disadvantaged open up early in the life of the child.

2/15/20167 The Argument in a Nutshell 3 - Life cycle skill formation is dynamic in nature. 4 - Abilities are multiple: Cognitive abilities are important for socioeconomic success. 5 - But socio-emotional skills such as perseverance, attention, motivation, self-control are important for success in life. 6 - Motivation, perseverance, tenacity feed into performance in society and even affect scores on achievement tests.

2/15/ If society intervenes early enough, it can affect cognitive, and socio-emotional abilities and the health of disadvantaged children. 8 - Early interventions promote schooling, reduce crime, promote workforce productivity and reduce teenage pregnancy. 9 - These interventions are estimated to have high benefit-cost ratios and rates of return. The Argument in a Nutshell Continued

12 - Early interventions have much higher returns than other later interventions such as reduced pupil-teacher ratios, public job training, convict rehabilitation programs, tuition subsidies or expenditure on police A major refocus of policy is required to understand the lifecycle of skill and health formation and the importance of the early years.

2/15/ Age Rate of return to investment in human capital Preschool programs Schooling Job training Preschool School Post-school Programs targeted towards the earliest years Figure: Rates of Return to Human Capital Investment at Different Ages: Return to an Extra Dollar at Various Ages

2/15/  For years, economists have worked hard to understand the forces of economic growth.  In virtually all theoretical work, human capital plays a central role in promoting long-run economic growth.  However, as the old literature in human capital formation, the literature in economic growth does not differentiate different investments at different stages of lifecycle.  Cunha (2008) addresses this issue. Early Intervention and Economic Growth