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

James Heckman and Lakshmi K. Raut ()
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Lakshmi K. Raut: U.S. Social Security Administration

No 7415, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: structural dynamic programming; preschool investment; early childhood development; intergenerational social mobility (search for similar items in EconPapers)
JEL-codes: J24 J62 O15 I21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-edu and nep-ure
Date: 2013-05
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Forthcoming in: Journal of Econometrics [Online First]

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Related works:
Journal Article: Intergenerational long-term effects of preschool-structural estimates from a discrete dynamic programming model (2016) Downloads
Working Paper: Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model (2013) Downloads
Working Paper: Intergenerational Long Term Effects of Preschool - Structural Estimates from a Discrete Dynamic Programming Model (2009) Downloads
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