Evaluating Public Programs with Close Substitutes: The Case of Head Start

From Pat Kline and Chris Walters:

This paper empirically evaluates the cost-effectiveness of Head Start, the largest early- childhood education program in the United States. Using data from the Head Start Impact Study (HSIS), we show that Head Start draws roughly a third of its participants from competing preschool programs that receive public funds. This both attenuates measured experimental impacts on test scores and reduces the program’s net budgetary costs. A calibration exercise indicates that accounting for the public savings associated with reduced enrollment in other subsidized preschools substantially increases estimates of Head Start’s rate of return, defined as the after-tax lifetime earnings generated by an extra dollar of public spending. Estimates of a semi-parametric selection model reveal substantial heterogeneity in Head Start’s test score im- pacts with respect to counterfactual care alternatives as well as observed and unobserved child characteristics. Head Start is about as effective at raising test scores as competing preschools and its impacts are greatest on children from families unlikely to participate in the program. Expanding Head Start to new populations is therefore likely to boost the program’s rate of return, provided that the proposed technology for increasing enrollment is not too costly.

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About ozidar

I'm an Assistant Professor of Economics at the University of Chicago Booth School of Business and a Faculty Research Fellow at National Bureau of Economic Research. You can follow me on twitter @omzidar. http://faculty.chicagobooth.edu/owen.zidar/index.html
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