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Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model

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  • James J. Heckman
  • Lakshmi K. Raut

Abstract

This paper formulates a structural dynamic programming model of preschool investment choices of altruistic parents and then empirically estimates the structural parameters of the model using the NLSY79 data. The paper finds that preschool investment significantly boosts cognitive and non-cognitive skills, which enhance earnings and school outcomes. It also finds that a standard Mincer earnings function, by omitting measures of non-cognitive skills on the right hand side, overestimates the rate of return to schooling. From the estimated equilibrium Markov process, the paper studies the nature of within generation earnings distribution and intergenerational earnings and schooling mobility. The paper finds that a tax financed free preschool program for the children of poor socioeconomic status generates positive net gains to the society in terms of average earnings and higher intergenerational earnings and schooling mobility.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 19077.

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Date of creation: May 2013
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Handle: RePEc:nbr:nberwo:19077

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  1. Heckman, James J., 2000. "Policies to foster human capital," Research in Economics, Elsevier, Elsevier, vol. 54(1), pages 3-56, March.
  2. Janet Currie & Duncan Thomas, 1993. "Does Head Start Make a Difference?," NBER Working Papers 4406, National Bureau of Economic Research, Inc.
  3. Cunha, Flavio & Heckman, James J. & Lochner, Lance, 2006. "Interpreting the Evidence on Life Cycle Skill Formation," Handbook of the Economics of Education, Elsevier, Elsevier.
  4. Kazuo Nishimura & Lakshmi K. Raut, 2007. "School Choice and the Intergenerational Poverty Trap," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 11(2), pages 412-420, 05.
  5. Victor Aguirregabiria & Pedro Mira, 1999. "Swapping the Nested Fixed-Point Algorithm: a Class of Estimators for Discrete Markov Decision Models," Computing in Economics and Finance 1999, Society for Computational Economics 332, Society for Computational Economics.
  6. Rust, John, 1987. "Optimal Replacement of GMC Bus Engines: An Empirical Model of Harold Zurcher," Econometrica, Econometric Society, Econometric Society, vol. 55(5), pages 999-1033, September.
  7. Hanushek, Eric A, 1986. "The Economics of Schooling: Production and Efficiency in Public Schools," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 24(3), pages 1141-77, September.
  8. Janet Currie, 2001. "Early Childhood Education Programs," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(2), pages 213-238, Spring.
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  1. Intergenerational Long Term Effects of Preschool – Structural Estimates from a Discrete Dynamic Programming Model
    by maximorossi in NEP-LTV blog on 2013-06-11 20:46:30
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Cited by:
  1. Karl Aiginger & Susanne Bärenthaler-Sieber & Johanna Vogel, 2013. "Competitiveness under New Perspectives," WWWforEurope Working Papers series, WWWforEurope 44, WWWforEurope.

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