STRENGTHENING BENEFIT-COST ANALYSIS for Early Childhood Interventions

Workshop Summary

Alexandra Beatty, Rapporteur

Committee on Strengthening Benefit-Cost Methodology for the Evaluation of Early Childhood Interventions

Board on Children, Youth, and Families

Division of Behavioral and Social Sciences and Education

NATIONAL RESEARCH COUNCIL AND INSTITUTE OF MEDICINE OF THE NATIONAL ACADEMIES

THE NATIONAL ACADEMIES PRESS

Washington, D.C.
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STRENGTHENING BENEFIT-COST ANALYSIS for Early Childhood Inter ventions Workshop Summar y Alexandra Beatty, Rapporteur Committee on Strengthening Benefit-Cost Methodology for the Evaluation of Early Childhood Interventions Board on Children, Youth, and Families Division of Behavioral and Social Sciences and Education THE NATIONAL ACADEMIES PRESS Washington, D.C. www.nap.edu

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THE NATIONAL ACADEMIES PRESS 500 Fifth Street, N.W. Washington, DC 20001 NOTICE: The project that is the subject of this report was approved by the Gov- erning Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engi- neering, and the Institute of Medicine. The members of the committee responsible for the report were chosen for their special competences and with regard for appropriate balance. This study was supported by Grant No. 08-91104-000-HCD between the National Academy of Sciences and the John D. and Catherine T. MacArthur Foundation. Any opinions, findings, conclusions, or recommendations expressed in this pub - lication are those of the author(s) and do not necessarily reflect the views of the organizations or agencies that provided support for the project. International Standard Book Number-13: 978-0-309-14563-3 International Standard Book Number-10: 0-309-14563-5 Additional copies of this report are available from National Academies Press, 500 Fifth Street, N.W., Lockbox 285, Washington, DC 20055; (800) 624-6242 or (202) 334-3313 (in the Washington metropolitan area); Internet, http://www.nap.edu. Copyright 2009 by the National Academy of Sciences. All rights reserved. Printed in the United States of America Suggested citation: National Research Council and Institute of Medicine. (2009). Strengthening Benefit-Cost Analysis for Early Childhood Interventions: Workshop Sum - mary. A. Beatty, Rapporteur. Committee on Strengthening Benefit-Cost Method - ology for the Evaluation of Early Childhood Interventions, Board on Children, Youth, and Families. Division of Behavioral and Social Sciences and Education. Washington, DC: The National Academies Press.

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal govern- ment on scientific and technical matters. Dr. Ralph J. Cicerone is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the char- ter of the National Academy of Sciences, as a parallel organization of outstand - ing engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Charles M. Vest is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Harvey V. Fineberg is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in pro - viding services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Ralph J. Cicerone and Dr. Charles M. Vest are chair and vice chair, respectively, of the National Research Council. www.national-academies.org

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COMMITTEE ON STRENGTHENING BENEFIT-COST METHODOLOGY FOR THE EVALUATION OF EARLY CHILDHOOD INTERVENTIONS Barbara L. Wolfe (Chair), Department of Population Health Sciences and Department of Economics, University of Wisconsin-Madison Ron Haskins, Economic Studies Program, The Brookings Institution, Washington, DC Robert M. Kaplan, School of Public Health, University of California, Los Angeles Lynn A. Karoly, RAND Corporation, Arlington, VA Henry M. Levin, Teachers College, Columbia University Jens Ludwig, Harris School of Public Policy Studies, University of Chicago James S. Marks, Robert Wood Johnson Foundation, Princeton, NJ Margaret C. Simms, The Urban Institute, Washington, DC Jane Waldfogel, Radcliffe Institute for Advanced Studies, Harvard University and Columbia University David L. Weimer, Robert M. LaFollette School of Public Affairs, University of Wisconsin-Madison Mary Ellen O’Connell, Study Director Alexandra Beatty, Rapporteur Bridget Kelly, Program Officer Wendy Keenan, Program Associate v

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BOARD ON CHILDREN, YOUTH, AND FAMILIES Bernard Guyer (Chair), Bloomberg School of Public Health, The Johns Hopkins University Jane D. Brown, School of Journalism and Mass Communication, University of North Carolina at Chapel Hill Linda Marie Burton, Sociology Department, Duke University Angela Diaz, Department of Pediatrics and Department of Community and Preventive Medicine, Mount Sinai School of Medicine Gary W. Evans, Department of Human Development, Cornell University Christine C. Ferguson, School of Public Health and Health Services, The George Washington University Sherry A. Glied, Mailman School of Public Health, Columbia University William T. Greenough, Department of Psychology, University of Illinois at Urbana-Champaign Ruby Hearn, Robert Wood Johnson Foundation (emeritus), Princeton, NJ Michele D. Kipke, Saban Research Institute, University of Southern California and Children’s Hospital, Los Angeles Betsy Lozoff, Center for Human Growth and Development, University of Michigan Pamela Morris, Policy Area on Family Well-Being and Children’s Development, MDRC, New York Charles A. Nelson, Laboratory of Cognitive Neuroscience, Harvard Medical School and Children’s Hospital, Boston Patricia O’Campo, University of Toronto and Centre for Research on Inner City Health, St. Michael’s Hospital, Toronto Frederick P. Rivara, Schools of Medicine and Public Health, University of Washington, and Children’s Hospital and Regional Medical Center, Seattle John R. Weisz, Judge Baker Children’s Center and Harvard Medical School Hirokazu Yoshikawa, Graduate School of Education, Harvard University Michael Zubkoff, Department of Community and Family Medicine, Dartmouth Medical School Rosemary Chalk, Board Director vi

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Acknowledgments T his workshop summary is based on the discussion at a March 4-5, 2009, workshop convened by the Board on Children, Youth, and Families and planned by the Committee on Strengthening Benefit- Cost Methodology for the Evaluation of Early Childhood Interventions. The committee members identified presenters, organized the agenda, made presentations, and facilitated discussion, although they did not par- ticipate in the writing of this report. This summary reflects their diligent efforts, the excellent presentations by other experts at the workshop, and the insightful comments of the many workshop participants. The work - shop was funded by the John D. and Catherine T. MacArthur Foundation; the interest and support of Michael Stegman, director of policy, is much appreciated. The summary has been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the Report Review Committee of the National Research Council. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsive- ness to the charge. The review comments and draft manuscript remain confidential to protect the integrity of the process. We thank the follow - ing individuals for their review of this report: Steve Aos, Office of the Associate Director, Washington State Institute for Public Policy, Olympia, Washington; Matthew Neidell, Department of Health Policy and Manage- vii

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viii ACKNOWLEDGMENTS ment, Mailman School of Public Health, Columbia University; Mariajosé Romero, National Center for Children in Poverty, Mailman School of Public Health, Columbia University; and Barbara L. Wolfe, Departments of Economics and Population Health Sciences, La Follette School of Public Affairs, University of Wisconsin-Madison. Although the reviewers listed above provided many constructive comments and suggestions, they were not asked to endorse the con- tent of the report, nor did they see the final draft of the report before its release. The review of this report was overseen by Michael A. Stoto, Health Services Administration and Population Health, School of Nursing and Health Studies, Georgetown University. Appointed by the National Research Council, he was responsible for making certain that an inde- pendent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the author and the institution.

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Contents 1 Introduction 1 An Overview of Benefit-Cost Analysis, 3 Primary Challenges, 5 2 Evaluation 9 Making Causal Inferences, 9 Examining Multiple Inferences, 13 3 Analyzing Costs 17 Resources and Costs of Replication, 17 An Example: The Abbott Preschool Program, 18 4 Assessing Outcomes 23 Research Questions and Methods, 23 Assessing Long-Term Outcomes, 31 5 A Closer Look at the Problem of Valuation 37 The Importance of Shadow Prices, 37 Examples from Other Sectors, 39 6 Generalizability of Benefit-Cost Analyses 47 Meta-Analysis, 47 Design and Analysis Considerations, 51 ix

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x CONTENTS 7 Benefit-Cost Analysis in a Policy Context 54 Perspectives, 54 Looking Forward, 58 Final Observations, 60 References 63 Appendixes A Glossary 69 B Workshop Agenda and Participants 72