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The Macroeconomic Consequences of Early Childhood Development Policies

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  • Daruich, Diego

    () (Federal Reserve Bank of St. Louis)

Abstract

To study long-run large-scale early childhood policies, this paper incorporates early childhood investments into a standard general-equilibrium (GE) heterogeneous-agent overlapping-generations model. After estimating it using US data, we show that an RCT evaluation of a short-run small-scale early childhood program in the model predicts effects on children's education and income that are similar to the empirical evidence. A long-run large-scale program, however, yields twice as large welfare gains, even after considering GE and taxation effects. Key to this difference is that investing in a child not only improves her skills but also creates a better parent for the next generation.

Suggested Citation

  • Daruich, Diego, 2018. "The Macroeconomic Consequences of Early Childhood Development Policies," Working Papers 2018-29, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2018-029
    DOI: 10.20955/wp.2018.029
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    More about this item

    Keywords

    Inequality; intergenerational mobility; early childhood development;

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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