The Cost/Benefit Analysis Project

A COST/BENEFIT ANALYSIS OF THE CAROLINA ABECEDARIAN PROJECT AND THE CAROLINA APPROACH TO RESPONSIVE EDUCATION

This project presents a cost/benefit analysis of the Carolina Abecedarian Project and the Carolina Approach to Responsive Education (ABC/CARE). ABC/CARE targeted a group of disadvantaged families with children born between 1972 and 1979 in Chapel Hill, North Carolina. The intervention was randomized, with the treatment group receiving center-based childcare from birth though age 5. Rich data on the individuals are collected through age 35.

We calculate the effect of ABC/CARE on life-cycle outcomes including cognitive and non-cognitive skills, health, employment, education, and crime. These treatment effects account for the fact that about 75% of the control group attended alternative center-based childcare (see Figure 1). In order to summarize the treatment effects across the myriad of outcomes, we present the counts of positive (and significant) effects (see Figures 2a and 2b).

The treatment effects help us understand the impact of ABC/CARE up to age 35. However, in order to calculate the life-cycle benefit/cost ratio and internal rate of return of the program, we need to understand the impact of ABC/CARE beyond age 35. To predict the later-life outcomes of the ABC/CARE subjects, we use auxiliary datasets that contain longitudinal information on individuals beyond age 35. We project income, welfare participation, crime, and health. Table 1 lists the auxiliary datasets we use for these projections.

The main estimates for the net present value of the treatment effects on the different components are presented in Figure 3. These net present values give the benefit/cost ratios and internal rates of return in Table 2. The pooled estimate of 6.29 implies that ABC/CARE is a cost-effective early childhood intervention.

Publications

The Life-cycle Benefits of an Influential Early Childhood Program
This paper estimates the large array of long-run benefits of an influential early childhood program targeted to disadvantaged children and their families Learn more.

Frequently Asked Questions

1Is it feasible to expand ABC/CARE?
Scaled up versions of ABC/CARE have been implemented in many settings. One example is the Infant Health and Development Program (IHDP), implemented for over 1,000 children in 8 different states. The high rate of return estimated in this project supports further expanding programs similar to ABC/CARE for disadvantaged children.
2Why are cost/benefit analyses useful?
Cost/benefit analyses allow academic results to be tangibly translated into policy action. Given there are constraints on government resources, it is important that the costs and benefits of public programs are considered when planning governmental budgets and investments. Some critics of cost/benefit analyses disparage the reliance on assumptions. Some examples include assumptions about costs, discount rates, marginal rates of taxation, in addition to program-specific assumptions. In order to present robust estimates, we calculate the results altering different parameters. The estimates we present are largely robust to these alterations.
3Do these results imply that early childhood education does not benefit females?
Although the results are stronger for males than for females, concluding that early childhood education does not benefit females is incorrect. First, ABC/CARE significantly improved several outcomes for females, including education. While more education can be considered beneficial, pursuing more education costs additional money. In other areas, like crime, although ABC/CARE reduces criminal activity for females, the crimes that the females in the sample committed were less costly than the crimes that the males committed (e.g. shoplifting compared with assault). Finally, although we consider a breadth of outcomes, it is important to consider that there are many life-relevant outcomes that are not captured. It is not always possible to monetize even those outcomes that are included. For these reasons, the estimates are lower for females than for males.

Figure 1: Control Substitution, Cumulative Enrollment

Figure 2a: Positively Impacted Outcomes, Treatment vs. Next Best

Figure 2b: Positively Impacted Outcomes, Treatment vs. Next Best, Significant at 10% Level

Figure 3: Net Present Value of Main Components of the Cost/Benefit Analysis Over the Life Cycle per Program Participant, Treatment vs. Next Best

Table 1: Auxiliary Data Sources for Interpolation and Extrapolation of Life-cycle Benefits and Costs

 

Subject’s Age

16-20

21-30

31-34

35-50

51-67

68-Death

Labor Income

 

CNLSY

NLSY79; PSID

 

 

Welfare

 

CNLSY

NLSY79; PSID

 

 

Health

PSID; MEPS; MCBS; HRS

Crime

NCDPS; NJRP; NVS; UCRS

 

 


Table 2: Cost/Benefit Analysis, Treatment vs. Next Best

 

Males

Females

Pooled

Benefit/Cost Ratio

11.1

2.45

6.29

(6.35)

(0.789)

(2.11)

Internal Rate of Return

%13.1

%10.4

%13.0

(%6.04)

(%7.62)

(%4.56)

Note: Standard errors are in parentheses. Bolded estimates indicate significance at the 10% level.

Project Team

Jorge Luís García

The University of Chicago


Jessica Koh

The University of Chicago


Anna Ziff

The University of Chicago


Sylvi Kuperman

The University of Chicago