Social Outcomes of ECEC- Case for public investment?

ECEC Meeting 21 June, 2010

Koji Miyamoto, OECD-CERI

Is there a case for public investment in ECEC?

1. Externality: ECEC improves individual’s social outcomes (eg, health and social cohesion) which brings significant benefits to others.

2. Efficiency of investing early versus later in the lifecycle (technology of skill formation).

3. Cost-effectiveness: ECEC can be considered to be among the cost-effective class of interventions tackling health and crime.

4. Tackling inequality: Early investment in the disadvantaged groups can be a cost-effective way to reduce inequalities in social outcomes.

1. Externality

ECEC brings not only economic returns but also wider benefits such as:

• better health,

• reduced likelihood of individuals engaging in risky behaviours, and

• stronger ‘civic and social engagement’

There are spill-over effects:

• Healthy individuals benefit others (e.g., smoking, drinking, obesity, STD)

• Cohesive individuals benefit others (e.g., volunteering, voting, trust)

• Others benefit from living in a “safe” environment.

2. Efficiency of Investing Early

Skills (cognitive and non-cognitive) are drivers of health, ‘civic and social engagement’ and crime.

Skills can be effectively and efficiently raised through early investment (technology of skill formation):

• Skills beget skills (Heckman and colleagues)

• Those with higher cognitive ability benefit more from schooling in terms of health behaviours (Conti, Heckman and Urzua, 2010)

• Skill complementarities (Carneiro, Goodman and Crawford, 2007)

Skills interact-Smoking at age 16 in the UK

Source: Carneiro, Crawford and Goodman (2006)

Likelihood of smoking

3. Is ECEC a cost-effective class of crime/health interventions?

ECEC might make sense even only considering its returns to health or crime.

• High benefit-cost ratios of early investment in tackling crime (Barnett, 2010; Carneiro and Heckman, 2003).

• Crime Strategy: “educational interventions” versus “law enforcement interventions” (Lochner and Moretti, 2004)

• Health Strategy: “school-based interventions versus “health treatment interventions” suggest that ECEC is likely to be among the cost-effective class of health interventions (OECD, 2010)

Can “ECEC policy” or “education policy” be considered “health policy” and/or “crime reduction policy” ?

More police officers versus More high-school graduates? (USA)

Costs of hiring a police officer: $ 80,000/yearBenefits from reduced crime: $ 200,000/year

Costs of raising high school graduation: $ 15,000/year(which would yield the same benefits of $ 200,000/year)

Levitt (1997) and Lochner and Moretti (2004)

3. Is ECEC a cost-effective class of crime/health interventions?

ECEC might make sense even only considering its returns to health or crime.

• High benefit-cost ratios of early investment in tackling crime (Barnett, 2010; Carneiro and Heckman, 2003).

• Crime Strategy: “educational interventions” versus “law enforcement interventions” (Lochner and Moretti, 2004)

• Health Strategy: “school-based interventions versus “health treatment interventions” suggest that ECEC is likely to be among the cost-effective class of health interventions (OECD, 2010)

Can “ECEC policy” or “education policy” be considered “health policy” and/or “crime reduction policy” ?

4. Tackling inequality

Important source of inequality in health and social cohesion are skills, and that skills deficits among the disadvantaged originate early in the lifecycle (Cutler and Lleras-Muney, 2010; Heckman and colleagues).

Disadvantaged parents have limited means to invest in their children.

Social costs of underinvestment in skills among the disadvantaged groups is likely to be very high.

CERI’s Work on Wider Benefits of Learning

Social Outcomes of Learning (SOL) Project• Final publication: “Improving Health and Social Cohesion through Education”

(forthcoming, September, 2010).

Education and Social Progress (ESP) Project• Proposed for 2011-12