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a blog from young economists at Nova SBE

Can Pre-School Education Serve as a Growth Engine?

In her last blog, Joana Cardim wrote about the return of pre-school education to future education and wages, and rose the question if Portugal should invest more in it so as to close the gap in educational attainment compared with other European countries. She refers to neurological and economic studies showing the impact of pre-school education in other nations, and argues that it positively affects the non-cognitive skills of pupils that are related to college attendance and outcomes.

The effects mentioned above can be described as being the private returns to education. Every additional year of schooling will increase an individual’s skills and is reflected in higher wages and educational attainments. But aside from the individual’s return to education, there is also an effect on the society if people obtain more education – referred to as the social returns to education. In September 2012 Timothy Bartik claimed at the TEDxMiamiUniversity conference that the effect of pre-school education on the local economy is even more important than the private returns. In his talk ‘Can pre-school save the economy?’ he argues that governments and policy makers have to change their viewpoint that pre-school education primarily affects the individual and recognize that their decision on the provision of pre-school education will directly influence the economic development and growth of the region.

His main argument is that a higher quality workforce – due to more education through pre-school programmes – will lead to higher wages, and thus economic development and growth. The enforcement of education will bring more and better jobs into a region or state and therefore promote higher earnings not only for the individuals having obtained this education but also for the remaining state’s residents. The provision of pre-school education will thereby have the same influence as business tax incentives programmes – but at a lower price. Timothy Bartik argues that according to his research an investment of 1$ of additional education expenditures in pre-school education will yield 2.78$ of per capita earnings of the state residents.

One of the explanations for this effect could be a peer effect inside firms. This means that people that work in an environment with better educated colleagues will be more productive, thereby making the firm more competitive, and ultimately fostering growth. Another reason for economic development can be found in the effects of education on crime and political participation. The negative correlation between education and crime suggests that pre-school education can have a significant impact on the reduction of crime, which again has a positive impact on economic development. Other social returns to education can be found in sustaining democratic attitudes and increasing political participation.

Nevertheless, Timothy Bartik received a lot of sceptics about his findings and their magnitude as for example a paper by Acemoglu cannot find significant social returns to education. Bartik’s policy recommendations should thus be analysed carefully in order to understand the real impact of pre-school education.


Written by Julia Seither

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Author: studentnovasbe

Master student in Nova Sbe

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