Project report

The Macroeconomic Consequences of Early Childhood Development Policies

Diego Daruich · 1 Jan 2018

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.A er 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 a er considering GE and taxation effects.Key to this difference is that investing in a child not only improves her skills but also creates a be er parent for the next generation.