Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model

42 Pages Posted: 31 May 2013

See all articles by James J. Heckman

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Lakshmi K. Raut

U.S. Social Security Administration

Multiple version iconThere are 3 versions of this paper

Date Written: May 2013

Abstract

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.

Suggested Citation

Heckman, James J. and Raut, Lakshmi K., Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model (May 2013). NBER Working Paper No. w19077. Available at SSRN: https://ssrn.com/abstract=2272514

James J. Heckman (Contact Author)

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Lakshmi K. Raut

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