In chapter 12 of Investing in Kids, I extend my estimates of economic development benefits beyond early childhood programs, to other changes that would increase human capital. Unlike the case of early childhood programs, I don’t analyze the costs of achieving these changes. Rather, I simply estimate the benefits if certain changes can be induced to occur.
These estimates can play a role in benefit-cost analyses. If researchers or policy advocates can identify a program that will achieve a specified human capital result at a known cost, these cost estimates can be combined with my benefit estimates.
One human capital change I consider is intervening to convert a low-weight birth into a normal weight birth. Such a change might be brought about by better pre-natal care.
Lower birth weight lowers skills and hence adult earnings in two ways. First, low birth weight lowers educational attainment. Second, low birth weight has direct effects on cognitive ability beyond its effects on educational attainment.
I use the estimated earnings effects of low-birth-weight from research by Rucker Johnson and Robert Schoeni (2007). Johnson and Schoeni compare the earnings of brothers in families where one or more brothers fall into both the low-birth-weight and normal-birth-weight groups. These estimates from Johnson and Schoeni are combined with my estimates of how many of these children will remain in the same state for their working career, and estimates of how state labor force quality affects jobs and wages.
Based on this analysis, the state economic development benefits from switching one low-weight birth to a normal –weight birth are $136,000. These benefits are the increase in present value of state residents’ per capita earnings.
These benefits would justify considerable costs for programs that can be shown to reduce the incidence of low-birth-weight. For example, a program that would only have a probability of 10% in converting a low-weight birth to a normal-weight birth would have benefits exceeding costs even if its costs were $13,000 per birth.
These large economic development benefits from reducing low-birth-weight indicates again that early intervention can have high economic benefits. This principle applies to programs beyond early childhood education.