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Strengthening Benefit-Cost Analysis for Early Childhood Interventions: Workshop Summary
Allocate cost burden among government support, private support, and client costs.
A comprehensive list of the aspects of the program that contribute to its quality might include the time children spend in the program (e.g., hours per day, days per week, weeks per year), the personnel ratios, the range of services supplied, facilities and materials, and so forth. Each program has its own characteristics; even when replicating a successful model, the goal is not generally to stamp out identical centers. Thus, the question of tradeoffs among certain quality features and costs arises from the beginning. Levin explained that there are various ways to document how priorities are established in the program design and replication process. This may include direct observation, in-depth interviews with the staff to ascertain what aspects of the inputs are critical, and review of program design requirements and other archival materials.
To identify the resources necessary to meet the target level of quality for selected program features, one would begin by identifying any known market prices (e.g., for staff salaries, one of the largest costs). However, current market prices may understate the long-term cost, if there is likely to be a large expansion of demand for the needed resource, or overstate it, so one must also calculate a shadow price. (Shadow prices are discussed in greater detail in Chapter 5.) Standard economic criteria should be used to calculate opportunity costs for participants, including those due to prospective market changes. Shadow prices also need to be calculated for any required resource for which there is not a competitive market equivalent. With all of this information, one can calculate total costs for a given enrollment goal, as well as the marginal costs that would be applicable if the program were to grow.
Sensitivity analysis—procedures to investigate the effects of various possible changes in the parameters—are important at this stage of the process, although Levin noted that this is rarely done in cost analysis. He advocated setting up confidence intervals for the cost estimates, as well as varying the quality dimensions to identify the tradeoffs and cost implications. The cost analysis will be most useful to decision makers if they can explore the cost feasibility with different budget or enrollment constraints. Levin closed with the general observation that a detailed, accurate picture of costs is just as important as a sophisticated picture of effects.
AN EXAMPLE: THE ABBOTT PRESCHOOL PROGRAM
Clive Belfield began by noting that he is often asked how much high-quality early childhood education costs. His response is that it is the wrong question—that one doesn’t evaluate an investment solely in terms