The Economic Returns to Early Childhood Education

Published in: Future of Children, v. 26, no. 2, Fall 2016, p. 37-55

Posted on RAND.org on November 30, 2016

by Lynn A. Karoly

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One way to assess the value of preschool education programs is to compare their upfront costs with the economic benefits they produce, measured by such outcomes as less need for special education services, improved high school graduation rates, higher earnings and less criminal activity in adulthood, and so on. What do such benefit-cost analyses tell us about the wisdom of investing in greater access to preschool? In this article, Lynn Karoly carefully reviews the evidence. First, she identifies the biggest challenges in measuring the economic returns from preschool programs. Then she summarizes the range of estimates from various benefit-cost analyses and some of the methodological differences that can account for the differences among them. Last, she explores the implications of the research for using benefit-cost analysis results to make policy decisions about preschool education. One key challenge: Although many preschool programs have been evaluated for their educational effectiveness, few have been subject to economic evaluations. Most predictive studies of preschool education's long-term economic benefits rely on benefit-cost analyses of programs that were implemented decades ago, when a far smaller proportion of children attended preschool at all, and that followed their subjects well into adult life. Although analyses of those programs suggest returns from preschool as high as $17 for every dollar invested, Karoly concludes that in today's context, it may be more realistic to expect returns in the range of $3 to $4. In the end, Karoly writes, we need to improve the quality and usefulness of economic evaluations of preschool, particularly by calculating the true economic value of preschool programs' short-term and medium-term effects in areas such as cognitive, social-emotional, and behavioral development. We could then more easily evaluate the economic benefits of a preschool program without having to wait until the participating children grow to adulthood.

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