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a blog from young economists at Nova SBE

Investment in Education and Social Mobility

Several studies in economics have shown that there are three important ideas regarding human development. The first is that cognitive ability influences future adult outcomes, such as wages ( paper by Murname and Willet). The second is that wages and schooling are affected by both cognitive, usually measured by test scores and IQ and non-cognitive abilities, such as motivation, perseverance, attention or self-confidence ( paper by Heckman et all 2006). And the last is that skills and abilities are determined both by genetics and environment (Rutter 2006).

There is also evidence that children’s abilities and skills are correlated with parental education and mother’s ability, and that gaps in ability become evident at the early age of five and usually remain until adulthood. However, the results from experimental programs implemented at early ages in the US, which focused in the physical, mental and social development of poor children show that they were effective in reducing the gap in ability of children from disadvantageous environments, promoting social mobility. However, the effect is reduced if other investments do not follow ( paper by Heckman et all -2008).

The evidence described above suggests that not all investment in education has the same impact and as such, investments in different stages of the development of the child should not be seen as perfect substitutes. In the model presented in a paper by Heckman (2007) the stock of skills at each point in time depends on the parental characteristics (cognitive and non-cognitive), on the child’s skills at birth, and on all the investments made in the previous periods. As a result, the investment in a certain period is more productive when the stocks of skills acquired in previous periods are higher (dynamic complementarity). And, a higher stock of skills in one period, both cognitive and non-cognitive, will lead to a higher future stock of skills (self-productivity).

Considering the previous model, a child whose parents have a lower level of education will have a lower stock of skills to begin with. Moreover, technical and financial constraints will negatively influence the level of investment in education in the first periods. After some periods, the gap in the stock of skills between a child from an underprivileged environment and a child whose parents have a higher level of income and education will become evident. The difference in stocks of skills will make future investments less productive, thus for similar levels of future investment the gap will perpetuate.

When considering policies to reduce gaps in skills that result from low stimulus family environments and investment constraints, there are two options. The first is to invest more in early periods of the child’s life, making future investments more productive. The alternative is to invest more in later periods, with lower levels of return. The efficient option is then to invest more sooner rather than later and keep investing in later periods. Empirical evidence from early intervention programs, in which disadvantage children are able to access high quality pre-school care show that the gap is reduced, and remains reduced if further investment is made in the future.

In Portugal, preschool care is not mandatory (Lei Quadro) and usually not present in public discussion. More important, as mentioned in Diário de Noticías the public provision currently only currently guarantees places for children over the age of five, although the government has the intention to expand the offer for children over the age of three in the next years. As seen above, the gaps in skills are already evident at that age of five, thus provision of this programs for children with three years old is according to the evidence of great importance. Provision of preschool care is not by itself sufficient to close the gap. The quality of the institutions is also important and should be part of the governments concerns.

To promote social mobility and equal educational opportunities evidence shows that it is more productive to invest in the early stages of the development of the child and that evidence for some countries, such as the US, indicate that the return in such investment will be positive to the society, as consequences of a lower crime rate, higher wages and better health. Investments in later periods may also have results, but they would be more costly and they might not get to all the children.

Mónica Simões

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Author: studentnovasbe

Master student in Nova Sbe

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