Title: Summary of research on the economic impact of preschool
Date: June 2011
Question: Please provide research on the economic impact of preschool.
Below are several references, along with author-provided abstracts or excerpts and links (where
available). We included 1) publications on the economic impact of preschool for participants, 2)
information on the fiscal impact of preschool for state and local economies, and 3) guidelines for
collecting preschool cost-benefit information and methodologies for conducting studies in this area.
We offer these resources for your own review, as we have not done an evaluation of the studies or
methodologies themselves. However, only publications from peer-reviewed journals and reputable
research or policy organizations are included here.
In addition to the resources listed below, the Insight Center in Oakland, CA may be helpful. The
Insight Center developed the early care and education (ECE) economic impact model
(http://www.insightcced.org/programs/early-care-education/economicmodel.html) to inform
policymakers, business leaders, and economic development leaders about the economic importance
of ECE. The components of the model can be customized, but typically include an in-depth,
geographically specific economic analysis that quantifies ECE’s contribution to the economy and a
corresponding action plan to strengthen the ECE system. The Insight Center has conducted
research and published more than 40 economic impact reports (some of which are listed below) for
counties and states all over the country. The Insight Center also trains local, state, and national
leaders to conduct the research necessary to produce economic information about ECE.
Research has shown that early childhood development programs, particularly high-quality
prekindergarten, provide a wide array of significant benefits to children, including improved school
readiness, higher test scores, better social skills, and higher graduation rates (Barnett and Masse
2005; Bowman et al. 2000). Studies (Belfield 2004; Karoly et al. 2005; Brown et al. 2008;
Committee for Economic Development 2006; Dickens et al. 2006) demonstrate that preschool
participation offers economic benefits to the individual and to society, as well. For example,
children who participate in high-quality prekindergarten programs require less special education
and are less likely to repeat a grade or need child welfare services. Once children who have
participated in preschool enter the labor force, their incomes are higher, along with the taxes they
will pay back to society. Both as young people and as adults, these children are less likely to enter
the criminal justice system. Thus, high-quality prekindergarten can benefit government budgets by
saving government spending on K–12 education, child welfare, and the criminal justice system, and
by increasing tax revenues.
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Other researchers (Barnett and Ackerman 2006) note that potential gains from early care and
education programs (which can include services for children 0–5 and their families) are not always
realized. Benefits and costs can depend on who is served by the program, the activities provided,
and the resources required to produce such activities.
Barnett, M. S., and Kelley P. J. (Eds.). (2002). Measuring preschool costs and revenues: Issues and
answers. A Summary Report of the 2002 Early Education Cost Symposium. New Brunswick,
NJ: NIEER. Retrieved December 14, 2010, from http://nieer.org/docs/?DocID=64
Summary: The goal was simple—to improve the methods for gathering and analyzing data used to
determine the cost of providing early education. Researchers attending the Early Education Cost
Symposium discussed methods for capturing both costs and revenues and related measurement
issues. The summaries of individual presentations and roundtable discussions included in this
report present the most current approaches to data collection and provide a forum to discuss issues
and problems in this research. School administrators, policymakers, and cost researchers will find
this report a valuable reference for collecting the most useful types of cost information for
evaluating and making decisions regarding resource allocation to early education programs. In
addition to the papers, the report contains a bibliography of cost studies and sample survey
instruments provided by the symposium participants. It is hoped the recommendations and
guidelines presented in this report will assist those collecting preschool cost information and point
the way toward future research.
Barnett, W. S. (2004). Maximizing returns for preschool education. Federal Reserve Bank of
Cleveland research conference: Education and economic development. Cleveland, OH: Federal
Reserve Bank of Cleveland. Retrieved December 15, 2010, from
Summary: Public investments in prekindergarten education have been promoted on the grounds
that such programs can produce high rates of return. This paper reviews the basis for such claims
and identifies policy choices likely to affect actual returns. Experience demonstrates that potential
gains are not always realized. As preschool education has become ubiquitous, the time is ripe to
develop policies to ensure that the public reaps an adequate return on its investment. Such policies
will significantly increase educational gains, particularly for our most disadvantaged children.
Barnett, W. S., and Ackerman, D. (2006). Costs, benefits, and the long-term effects of early care and
education programs: Recommendations and cautions for community developers. Journal of
the Community Development Society, 37(2), 86–100. Retrieved December 14, 2010, from
Abstract: Participation in early care and education (ECE) programs has become the norm for this
nation’s three- and four-year-olds. Public investments in such programs have been promoted on the
grounds that they can produce high rates of return in the form of academic outcomes, greater
employment rates, and reduced crime. Yet, potential gains are not always realized, as benefits and
costs depend on who is served by the program, the activities provided, and the resources required
to produce such activities. This paper reviews the basis for claims related to the costs, benefits, and
long-term effects of ECE programs, including effects on children’s learning and development and
parental earnings. It also summarizes what is known about the extent to which variations in child
and program characteristics and the community context alter the magnitude of benefits from ECE,
as well as policy choices that could increase educational gains and other benefits, thereby
increasing the return on public investments.
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Barnett, W. S., and Masse, L. N. (2005). Early childhood program design and economic returns:
Comparative benefit-cost analysis of the Abecedarian program and policy implications.
Economics of Education Review 26, 113–125. Retrieved December 15, 2010, from
Abstract: Child care and education are to some extent joint products of preschool programs, but
public policy and research frequently approach these two goals independently. We present a
benefit–cost analysis of a preschool program that provided intensive education during full-day
child care. Data were obtained from a randomized trial with longitudinal follow-up through age 21.
Study participants were 104 economically disadvantaged children and their families. Economic
benefits include increased maternal earnings, decreased K–12 schooling costs, increased lifetime
earnings, and decreased costs related to smoking. Net present value is positive over a range of
reasonable discount rates. Program benefits are compared to estimates from other studies with
particular attention to a benefit–cost analysis of a half-day preschool program that did not provide
child care. Returns to early childhood policy could be improved by greater attention to how
programs might maximize education and child care benefits together regardless of the primary aim
of the policy’s agency sponsor.
Belfield, C. R. (2004). Investing in early childhood education in Ohio: An economic appraisal. New
York: Teachers College, Columbia University. Retrieved December 14, 2010, from
Summary: Early childhood education enhances children’s prospects. It also has an economic pay-off
to society. Using economic analysis and new empirical evidence, this paper describes and calculates
this pay-off for the state of Ohio. Currently, only 28% of three-year-olds in Ohio participate in
publicly supported educational programs before kindergarten (through state/federal Head Start,
special education, or pre-K providers). The proposal here is to raise that proportion to 57% and to
offer education for two years before kindergarten. This proposed policy would require 42,874 new
pre-K places. It would require a total investment of between $285 million and $482 million. This
investment is likely to yield a strong pay-off for the state government. Economic analysis is used to
estimate this pay-off, using existing research evidence, new findings from national datasets, and
state-specific data for Ohio. The analysis indicates that an expanded pre-K program would yield
cost-savings across several domains (school system, tax revenues, health and welfare systems,
criminal justice system)…This economic analysis establishes that strongly positive returns are
expected from investment in pre-K provision in Ohio.
Belfield, C. R. (2005). The fiscal impacts of universal pre-K: Case study analysis for three states.
Washington, DC: Committee for Economic Development. Retrieved December 14, 2010,
Abstract: Economic evaluations find small-scale pre-K programs generate high economic returns to
the state, and most states offer pre-K provision targeted to low-income families. This paper
investigates the economic consequences of expanding pre-K provision so that it is universally
accessible to all children. First, the model assumptions and framework are set out. Second, case
studies for three states—Massachusetts, Wisconsin, and Ohio—are presented. For each state, the
existing provision of pre-K is described, along with a policy scenario to ensure universally
accessible pre-K. The costs of expanding provision are reported. Using national and state-specific
data, the fiscal benefits to the state—from higher tax revenues, lower crime expenditures, more
efficient school systems, and lower health/welfare burdens—are calculated. The costs and benefits
are then compared. For each state, the fiscal benefits of making pre-K provision universally
accessible outweigh the costs of program.
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Belfield, C. R. (2007). An economic analysis of pre-K in Arkansas. Washington, DC: Pre-K Now.
Retrieved December 9, 2010, from http://www.plan4preschool.org/documents/econ-pk-
Excerpt: With this new study, Arkansas becomes the latest in a growing list of states that can
quantify the positive financial returns of state investments in high-quality pre-K for all children.
Arkansas pre-K is already one of the nation’s highest-quality programs and so, is perfectly
positioned for substantial expansion. The economic analysis conducted for this report found that
expanding the Arkansas Better Chance pre-K program to serve all three- and four-year-olds would,
conservatively, yield an impressive $1.58 for every state dollar invested. In addition, the direct
financial benefits to children and families, which are not calculated here, would likely far exceed the
robust returns to taxpayers.
Belfield, C. R., Nores, M., and Barnett, W. S. (2005). The High/Scope Perry Pre-School Program cost-
benefit analysis, age 40. Ypsilanti, MI: High/Scope Press.
Abstract: This paper presents an updated cost-benefit analysis of the High/Scope Perry preschool
program, using data on individuals aged 40. Children were randomly assigned to a treatment or
control group. Program costs are compared against treatment impacts on educational resources,
earnings, criminal activity, and welfare receipt. Net present values are calculated for participants,
the general public, and society. The treatment group obtains significantly higher earnings. For the
general public, higher tax revenues, lower criminal justice system expenditures, and lower welfare
payments easily outweigh program costs; they repay $12.90 for every $1 invested. However,
program gains come mainly from reduced crime by males.
Bowman, B. T., Donovan, M. S., and Burns, M. S. (Eds.). (2000). Eager to learn: Educating our
preschoolers. Committee on Early Childhood Pedagogy, National Research Council.
Washington, DC: National Academy Press. Retrieved December 15, 2010, from
Summary: This book synthesizes the newest research findings on how young children learn and the
impact of early learning. In language accessible to parents as well as educators, the book examines
the interplay of biology and environment, variations in learning among children from different
social and economic groups, and the importance of health, safety, nutrition, and interpersonal
warmth to early learning. The book documents how very early in life learning really begins and
presents conclusions and recommendations in the areas of the teacher-child relationship, the
organization and content of curriculum, meeting the needs of children most at risk of school failure,
teacher preparation, assessment of teaching and learning, and more.
Brown, B., Ramos, M., and Traill, S. (2008). The economic impact of the early care and education
industry in Los Angeles County. Oakland, CA: The Insight Center for Community Economic
Development. Retrieved December 13, 2010, from
Summary: The Economic Impact of the Early Care and Education Industry in Los Angeles County
reports that the early care and education (ECE) industry, which is comprised of child care and child
development programs and licensed home providers for children under age 12, preschool
programs, after school, latchkey, and other out-of-school-time programs, is a vital element in
strengthening and sustaining the county’s economy. The study found that the early childhood
industry in Los Angeles County generates $1.9 billion dollars annually, and directly supports over
65,000 full-time jobs. Between 2006 and 2016, it will be responsible for generating the sixth
highest number of new jobs in the county. Additionally, the industry was found to play a vital role in
the effectiveness of other industries by creating opportunities for parents to be productive
participants in the workforce, helping young children develop skills to contribute to the economy as
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adults, and preventing occurrences of incarceration, welfare dependency, and other trends that
may have a negative impact on the economy.
Committee for Economic Development. (2006). The economic promise of investing in high-quality
preschool: Using early education to improve economic growth and the fiscal sustainability of
states and the nation. Washington, DC: Author. Retrieved December 13, 2010, from
Abstract: Early education programs have long been regarded as an important step in preparing
children for primary school—but investing in the education of America’s youngest learners has
emerged as one of the most promising ways to help strengthen the future economic and fiscal
position of our states and nation. High-quality preschool programs offer societal benefits that far
outweigh program costs by improving the later education, employment, earnings, and crime
outcomes of students who attend preschool. These programs improve the fiscal position of states
and the nation by reducing education and criminal justice costs, while boosting income-tax
revenues. They also contribute to long-term economic growth and development for states and the
nation. This report provides the economic evidence that justifies increasing investments in
preschool. It recommends that publicly funded preschool programs meet the quality standards
necessary to deliver the promised economic benefits. It also recommends that federal, state, and
local governments consider the broad economic benefits of preschool when deciding how to
allocate resources in the face of competing uses and demands. Appended to this report is a table
showing spending and enrollment in publicly funded prekindergarten programs, by state.
Dickens, W. T., Sawhill, I. V., and Tebbs, J. (2006). The effects of investing in early education on
economic growth. Policy Brief #153. Washington, DC: The Brookings Institution. Retrieved
December 13, 2010, from
Abstract: Many in Congress and the administration have called for new investments in education in
order to make the United States more competitive, with President Bush stressing the importance of
education in preparing young Americans to “fill the jobs of the 21st century.” Yet advocates of early
childhood education have only recently stressed the economic benefits of preschool programs, and
it has been difficult to win support for these short-term investments given the long-term nature of
the benefits to the economy. This policy brief analyzes the impact of a high-quality universal
preschool policy on economic growth, concluding that such a policy could add $2 trillion to annual
U.S. GDP by 2080. By 2080, a national program would cost the federal government approximately
$59 billion, but generate enough additional growth in federal revenue to cover the costs of the
program several times over.
Karoly, L. A., and Bigelow, J. H. (2005). The economics of investing in universal preschool education in
California. Santa Monica, CA: RAND Corporation. Retrieved December 9, 2010, from
Excerpt: There is increased interest in California and other states in providing universal access to
publicly funded preschool education for one or two years prior to kindergarten entry. In
considering such a program, policymakers and the public focus on the potential benefits from a
universal preschool program, as well as the estimated costs. This study, conducted by RAND Labor
and Population, a unit of the RAND Corporation, aims to inform such deliberations by conducting an
analysis of the economic returns from investing in preschool education in the state of California.
Specifically, we focus on the following two questions: 1) What are the expected direct costs and
benefits for the public sector and society as a whole of implementing a high-quality universal
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preschool program in California? And 2) What are the other potential indirect economic and
noneconomic benefits for California that may be associated with such a program? The analysis
builds on prior research at RAND on the costs and benefits of early childhood programs, and it
draws on other related studies that have examined the economic returns from preschool programs.
The analysis is tailored, as much as possible, to account for the California context in terms of
demographics, costs of public-sector programs and services, and other aspects of the California
Lynch, R. G. (2007). Enriching children, enriching the nation: Public investment in high-quality
prekindergarten. Washington, DC: Economic Policy Institute. Retrieved on December 9,
2010, from http://www.epi.org/publications/entry/book_enriching/
Excerpt: This study analyzes the costs and the fiscal, earnings, and reduced crime benefits of public
investment in 1) a targeted, voluntary, high-quality prekindergarten education program that serves
only three- and four-year-old children who live in families in the lowest quarter of the income
distribution, and 2) a similar, but universal prekindergarten education program made available to
all three- and four-year-old children. The governmental costs and benefits of both publicly funded
prekindergarten programs, measured as year-by-year expenditures, budget savings, and revenue
impacts, are estimated from program implementation in 2007 through the year 2050. In addition to
the long-term budgetary consequences to governments that follow from such investment, the
earnings and crime implications for individuals and society are calculated for the same years.
National Economic Development Law Center. (2002). The economic impact of the child care industry
in Sonoma County. Oakland, CA: Author. Retrieved December 13, 2010, from
Summary: This report presents a wide range of compelling evidence showing investments in the
child care infrastructure have direct, positive effects on the ability of the local economy to
experience growth and vitality. The report also demonstrates that an intimate understanding of the
interaction between child care supply and economic growth improves the efficiency of investments
in child care, and therefore saves both private and public expenditures, directly and indirectly. To
cast child care in an economic development light, this report:
Quantifies the local economic effects of the licensed child care industry in Sonoma County.
Assesses the extent to which child care currently supports the economy of Sonoma.
Discusses other economic benefits of child care, including public sector savings that result
from investments in quality child care.
Evaluates issues in the supply and demand for child care in Sonoma County that affect the
future performance of the county’s economy.
Reynolds, A. J., Temple, J. A., Ou, S. R., Arteaga, I. A., and White, B. A. B. (2011). School-based early
childhood education and age-28 well-being: Effects by timing, dosage, and subgroups.
Science. Retrieved June 14, 2011, from
Abstract: Advances in understanding the effects of early education have benefited public policy and
developmental science. Although preschool has demonstrated positive effects on life-course
outcomes, limitations in knowledge on program scale, subgroup differences, and dosage levels have
hindered progress. We report the effects of the Child-Parent Center Education Program on
indicators of well-being up to 25 years later for more than 1,400 participants. This established,
publicly funded intervention begins in preschool and provides up to six years of service in inner-
city Chicago schools. Relative to the comparison group receiving the usual services, program
participation was independently linked to higher educational attainment, income, socioeconomic
status (SES), and health insurance coverage, as well as lower rates of justice-system involvement
and substance abuse. Evidence of enduring effects was strongest for preschool, especially for males
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and children of high school dropouts. The positive influence of four years or more of service was
limited primarily to education and SES. Dosage within program components was mostly unrelated
to outcomes. Findings demonstrate support for the enduring effects of sustained school-based early
education to the end of the third decade of life.
Wat, A. (2007). Dollars and sense: A review of economic analyses of pre-K. Washington, DC: Pre-K
Now. Retrieved December 9, 2010, from
Excerpt: [This report] provides readers with a “one-stop shop” for the most current and relevant
economic-impact studies of pre-K. Second, it highlights the key arguments made by these studies as
well as other factors to consider in their use to help readers more strategically choose those studies
that speak directly and appropriately to the interests and concerns of their audience.
The research summarized here was located by searching the Education Resources Information
Center (ERIC) and Google/Google Scholar electronic databases for recent studies, reports, or
articles that referenced the following set of keywords: economic impact preK, economic impact
preschool, economic effects preschool, economic benefit preschool. These searches, plus reviews of
the resulting documents’ bibliographies, yielded this paper’s core references.
This memorandum is one in a series of quick-turnaround responses to specific questions posed by educators and
policymakers in the western region (Arizona, California, Nevada, Utah), which is served by the Regional Educational
Laboratory West (REL West) at WestEd. This memorandum was prepared by REL West under a contract with the U.S.
Department of Education’s Institute of Education Sciences (IES), Contract ED-06-CO-0014, administered by WestEd. Its
content does not necessarily reflect the views or policies of IES or the U.S. Department of Education nor does mention of
trade names, commercial products, or organizations imply endorsement by the U.S. Government.
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WestEd — a national nonpartisan, nonprofit research, development, and service agency — works with education and
other communities to promote excellence, achieve equity, and improve learning for children, youth, and adults.
REL West at WestEd • 730 Harrison Street • San Francisco, CA 94107 • 866.853.1831 • relwest@WestEd.org • http://relwest.wested.org