Carolina Abecedarian Study

The initial cost of the program was $63,467 per child. The policy led to increases in parental labor earnings of $68,728, which generated an $13,746 in tax revenue. That calculation uses a tax and transfer rate of 20%. The impact of parental earnings on net costs would be greater if a 35% tax and transfer rate was used, as in Barnett and Masse (2007). In addition, the program partially crowded out previous attendance at publicly-funded preschools, which Barnett and Masse (2007) suggest reduced government costs by $3,165. In adulthood, Barnett and Masse (2007) estimate that the program increased college attendance by 23 percentage points; Hendren and Sprung-Keyser (2021) estimate this cost the government an estimated $7,428. Campbell et al. (2012) also estimate that the program increased earnings at age 30 by $12,730, although this increase is not statistically distinct from zero. Hendren and Sprung-Keyser (2020) project those earnings gains across the lifecycle to produce a lifetime earnings impact of $191,990, when earnings are discounted at 3%. Applying a 20% tax and transfer rate produces a $38,398 increase in government revenue, although the estimate is not statistically different from zero. The estimate of these cost savings would be higher if a higher tax and transfer rate is used.

On net, Hendren and Sprung-Keyser (2020) estimate the total cost of the program to be $13,990, roughly 22% of its upfront cost. This estimate has a wide confidence interval that ranges from a net cost of $73,044 to a net savings (negative net cost) of $48,086.

The WTP of $166,349 and Net Cost of $13,990 implies an MVPF of 11.89. The confidence interval on this estimate is quite wide, ranging from -0.18 (so that the program provides no net benefit per dollar spent) to infinity (so that the program pays for itself).