Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes

Orla Doyle presented the paper below at our seminar series last year. This is incredibly detailed and inspirational work contributing to the development of a solid empirical base for the development of education and general social policy.

Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes*
Orla Doyle (University College Dublin)
Colm Harmon (University of Sydney and IZA)
James J. Heckman (University of Chicago, University College Dublin, NBER and IZA)
Caitriona Logue (University College Dublin)
Seong Hyeok Moon (University of Chicago)

Abstract
The literature on skill formation and human capital development clearly demonstrates that early investment in children is an equitable and efficient policy with large returns in  adulthood. Yet little is known about the mechanisms involved in producing these long-term effects. This paper presents early evidence on the nature of skill formation based on an  experimentally designed, five-year home visiting program in Ireland targeting disadvantaged  families - Preparing for Life (PFL). We examine the impact of investment between utero to 18 months of age on a range of parental and child outcomes. Using the methodology of Heckman  et al. (2010a), permutation testing methods and a stepdown procedure are applied to account for the small sample size and the increased likelihood of false discoveries when examining multiple outcomes. The results show that the program impact is concentrated on parental behaviors and the home environment, with little impact on child development at this early  stage. This indicates that home visiting programs can be effective at offsetting deficits in  parenting skills within a relatively short timeframe, yet continued investment may be required  to observe direct effects on child development. While correcting for attrition bias leads to some changes in the precision of estimates, overall the results are quite similar.

Keywords: Early childhood intervention; human capital development; randomized control
trial; multiple hypotheses; permutation testing.
JEL Classification: C12, C93, J13, J24.
This Version: 5th August, 2013