The Economic Rationale for Investing in Children: A Focus on Child Care. Abstract


The dramatic increase in labor market participation of married women and single parents with young children has led to a considerable expansion in day care and other early education programs. Widespread concern that many children attend low quality day care centers or preschools has lead to a call for substantial funding increases and a much more active government role in regulating these sectors. The widely held belief that readiness to learn upon entering kindergarten is a key to future academic performance for economically disadvantaged children has only added to the demand for better early education.

This paper draws from the experiences of elementary and secondary education in the U.S. to consider the rationale for government intervention in childcare and early education as well as the desirability of specific policies. Section II considers the rationale for government intervention in the elementary and secondary education sector and the relevance of these arguments for early education. It focuses on issues of market failure, equality of opportunity and protection of minors. Section III turns to a review of the evidence on the determinants of school quality. Though there is evidence that resources such as smaller classes improve the rate at which some students learn, the primary determinant of school effectiveness is the quality of instruction. Importantly, the majority of the variation in teacher quality is not explained by differences in salary, teacher education or other factors that lend themselves to simple government interventions. The final section offers a number of policy recommendations based upon the evidence from research on public schools. It emphasizes the importance of instructional quality and the lack of success that public schools have had in trying to procure better teaching simply by raising requirements that prospective teachers must meet. The section also highlights the dynamic nature of the education sector, in particular the need to learn from experience.