Metro area size: effects on the economic development benefits of early childhood programs

My book, Investing in Kids, provides evidence that a state or local government’s investment in high-quality early childhood programs will have a payoff for that state or local area. That payoff is what I call “economic development benefits”: higher per capita earnings for state or local area residents. The book compares the economic development benefits for early childhood programs with the economic development benefits of business incentives, for example business tax incentives such as property tax abatements.

A natural question is whether these local economic development benefits vary with local area characteristics. Do early childhood programs pay off in economic development benefits for all types of local areas? Or do significant benefits only occur for certain types of local areas?  These questions are explored in chapter 9 of Investing in Kids.

In today’s post, I consider how the local economic development benefits of early childhood programs vary with a local area’s population size. A later post will consider how business incentive benefits vary with a local area’s population size.   Further posts will consider how local economic development benefits vary with a local area’s growth.

We might expect early childhood programs to have smaller economic development effects in smaller metro areas because of out-migration.  We might expect that fewer participants in early childhood programs will remain in that same metro area during their working careers.

However, when we look at the data, we do not find large differences in “staying” except in the smallest metro areas. In the empirical work done for the book, these are metro areas with populations of less than 330,000.

Furthermore, these differences in “staying” are not large. I estimate that the local economic development benefits of early childhood programs are about 20% smaller for the smallest metro areas, compared to other metro areas.

As a result, I estimate that regardless of metro area size, an area’s investment in early childhood programs will still have local economic development benefits exceeding costs.

What is going on here? One interpretation is that smaller metro areas may foster stronger local ties. Therefore, more people end up sticking around as adults than one might expect. Only for the smallest metro areas do we find significant reductions in “staying”, and even for these smaller metro areas, the differences are not great.  Therefore, metro area size does not have large effects on the attractiveness of early childhood programs as economic development investments.

About timbartik

Tim Bartik is a senior economist at the Upjohn Institute for Employment Research, a non-profit and non-partisan research organization in Kalamazoo, Michigan. His research specializes in state and local economic development policies and local labor markets.
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