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


In this paper I attempt, first, to explicate rationales which have been given for public sector investment in employment and training and, second, to suggest to what degree some similar rationales might be applied to argue for public sector investment in child care.

Before launching into the detailed discussion, I summarize here the types of rationales for public sector investment in employment and training. I provide this summary in the form of an outline which contains the sections of the paper which follow.

Human Capital Rationales

  • Individual Human Capital Investment
    • Poor Information
    • Externalities are Ignored by Individuals
    • Individual Inability to Finance the Investment
  • Human Capital Investment by Firms
    • General and Specific Skill Investments
    • Asymmetric Information
    • "Efficiency Wages"

Macroeconomic Rationales

  • Unemployment and Inflation
  • Long Term Growth

Segmented Markets Rationales

Distributional Rationales

  • Education and Youth Programs
  • The "Second Chance System"
  • Skills Mismatch and Spatial Mismatch
  • "Soft Skills", contextual learning, social capital and social isolation
  • Welfare Reform

Area Redevelopment Rationales

Merit Goods Rationales


  • Timing, Targeting, and Early Intervention
  • Child Care, Working Parents and the Child Care Workforce

After each section explicating a category of rationales as applied to employment and training, I provide a brief assessment of the degree to which that type of rationale might be applied to the case of public sector intervention in child care.