Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model
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.
We would like to thank the anonymous Associate Editor and two referees of the Journal of Econometrics for many valuable comments. An earlier draft was presented at the Centre for Development Studies, Indian Statistical Institute, Indira Gandhi Institute of Development Research, Nanyang Technological University, Periyar University, Singapore National University, University of Nevada at Las Vegas, Tokyo University, University of Southern California, and the Western Economic Association Meeting, 2003. Comments of the participants of these workshops, especially of Juan Pantano as a discussant of the Western Economic Association conference and comments from Han A.T. Raut and T.N. Srinivasan are gratefully acknowledged. This research was supported in part by the American Bar Foundation, the Pritzker Children's Initiative, the Buffett Early Childhood Fund, NICHD R37 HD065072, R01 HD054702, the Human Capital and Economic Opportunity Global Working Group - an initiative of the Becker Friedman Institute for Research in Economics - funded by the Institute for New Economic Thinking (INET), and an anonymous funder. Raut is an Economist at the Social Security Administration (SSA). This paper was prepared prior to his joining SSA. The analysis and conclusions expressed are those of the authors and not necessarily those of SSA, nor of the funders or commentators mentioned here, nor of the National Bureau of Economic Research.
Heckman, James J. & Raut, Lakshmi K., 2016. "Intergenerational long-term effects of preschool-structural estimates from a discrete dynamic programming model," Journal of Econometrics, Elsevier, vol. 191(1), pages 164-175. citation courtesy of