The Productivity Argument for Investing in Young Children
James J. Heckman and Dimitriy V. Masterov
This paper presents a productivity argument for investing in disadvantaged young
children. For such investment, there is no equity-efficiency tradeoff.
James J. Heckman is the Henry B. Schultz Distinguished Service Professor in the Department of Economics,
University of Chicago.
Dimitriy V. Masterov is a graduate student in the Department of Economics, University of Michigan.
This lecture was given as the T.W. Schultz Award Lecture at the Allied Social Sciences Association annual meeting,
Chicago, January 5-7, 2007.
This research was supported by a grant from NICHD (NIH R01-HD043411) and a grant from the Pew Charitable
Trust and the Partnership for America’s Economic Success. The web appendix for this paper can be downloaded
in disadvantaged environments. Figure 1 graphs time series of alternative measures of the
percentage of children in disadvantaged families. The percentage of children born into, or living
in, nontraditional families has increased greatly in the last 30 years.
Approximately 25% of
poverty and born into poor families have fallen recently, they are still high, especially among
Adverse environments place children at risk for social and economic failure. The accident
of birth plays a powerful role in determining adult success.
Many have commented on this
families as a question of fairness or social justice.
This paper makes a different argument. We argue that, on productivity grounds, it makes
sense to invest in young children from disadvantaged environments. Substantial evidence shows
that these children are more likely to commit crime, have out-of-wedlock births and drop out of
school. Early interventions that partially remediate the effects of adverse environments can
reverse some of the harm of disadvantage and have a high economic return. They benefit not only
the children themselves, but also their children, as well as society at large.
Investing in disadvantaged young children is a rare public policy with no equity-
efficiency tradeoff. It reduces the inequality associated with the accident of birth and at the same
time raises the productivity of society at large.
While a more rigorous analysis is necessary to obtain a better understanding of the effects
of early intervention programs, their precise channels of influence, and their exact benefits and
costs, the existing evidence is promising. An accumulating body of knowledge shows that early
childhood interventions for disadvantaged young children are more effective than interventions
the effects of early disadvantages at later ages is often prohibitively costly (see Carneiro, Cunha
and Heckman and Cunha and Heckman, 2006). Skill begets skill; learning begets learning. Early
disadvantage, if left untreated, leads to academic and social difficulties in later years. Advantages
accumulate; so do disadvantages. A large body of evidence shows that post-school remediation
programs like public job training and General Educational Development (GED) certification
cannot compensate for a childhood of neglect for most people.
This evidence has dramatic consequences for the way we think about policy toward skill
formation. Most current policies directed towards improving the skills of youth focus on schools
as the locus of intervention. The No Child Left Behind Act uses mandates and punishments to
encourage schools to remediate the educational deficits of disadvantaged children. School
accountability schemes are used to motivate higher levels of achievement for children from
While these initiatives are well-intentioned, their premise is faulty. Schools work with
what parents give them. The 1966 Coleman Report on inequality in school achievement clearly
documented that the major factor explaining the variation in the academic performance of
children across U.S. schools is the variation in parental environments—not the variation in per
pupil expenditure across schools or pupil-teacher ratios. Successful schools build on the efforts of
successful families. Failed schools deal in large part with children from dysfunctional families
that do not provide the enriched home environments enjoyed by middle class and upper middle
class children. Since failure in school is linked to so many social pathologies, each with
substantial social and economic costs, a policy of equality of opportunity in access to home
environments (or their substitutes) is also a one that promotes productivity in schools, the