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Achieving a High Return on Early Childhood Investment: Evidence Proposal and the Minnesota Pilot
Dr. Arthur J. Rolnick & Rob Grunewald
Federal Reserve Bank of Minneapolis
For well over 20 years, government leaders at the state and local levels have invested in economic development schemes with public dollars that are at best a zero-sum game. In the name of economic development and creating new jobs, virtually every state in the union has tried to lure companies with public subsidies. Previous studies have shown that the case for these so-called bidding wars is shortsighted and fundamentally flawed. From a national perspective, jobs are not created—they are only relocated. The public return is at most zero.
We don’t pretend to have all the answers to economic development, but we’re quite certain that investing in early childhood education is more likely to create a vibrant economy than using public funds to lure a sports team by building a new stadium or attracting an automaker by providing tax breaks. First, a child’s first few years are a sensitive period for brain development and set a trajectory for his or her success in school and later in life as an adult. Second, a series of longitudinal studies show that well-focused and funded investments in early childhood development programs produce substantial returns for children from disadvantaged environments.
The findings from early childhood research, promising though they are, pose a challenge: How can we reproduce the success of model early childhood development programs on a large scale? We believe that large-scale efforts can succeed if they are market based and incorporate the following key attributes: start early, involve parents, focus on at-risk children, provide incentives for quality programs, and make a long-term commitment.
In this paper, we first review the evidence on the potentially high return to early childhood investment. Second, we present our market-based proposal for achieving these returns on a large scale. Finally, we examine the Minnesota pilot that is designed to test the market-based approach.
Click here to read the full paper.
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