Click here for search results

Analyses of Costs and Benefits

An analysis of the costs of different ECD programs, approaches or components needs to be coupled to the benefits that will be derived from them. An inexpensive program in absolute terms can be relatively very expensive if it does not produce satisfactory child outcomes. The costs per beneficiary per year might range from $25 to over $2,500 and programs with different costs are likely to have different impacts on child development.

Although affordability can play an important role in deciding which approach to adopt, the cheapest program or project component is not always best in fostering healthy child development. But the reverse is not necessarily true either. Expensive projects do not always produce the best quality services. An analysis of cost-effectiveness will give better insight in which programs are most effective in relation to their costs. A cost-benefit analysis will compare both the costs and benefits of a particular intervention in monetary terms to determine whether the intervention is an economically sound investment. To analyze the economic benefits and costs of ECD interventions, use the ECD calculator.


Costs per Beneficiary per Year

A first step in analyzing the costs of a program, is to estimate the costs per beneficiary per year. This entails estimating the total costs of the program and estimating the number of children enrolled.

Different costs per beneficiary among programs can be caused by: differences in program characteristics (for instance, child/staff-ratio, number of meals provided, inclusion of health services), differences in regional costs (for example, salaries or the costs of transportation), or differences in efficiency. Second, even a program that is implemented based on one single approach across the country can yield different results for different states if enrollment is lower in more sparsely populated areas for example.

Waiser (1998) gives an example of how to compare annual per-capita costs of ECD programs in different countries. When making international comparisons, take into account inflation and exchange rates. The analysis can use the concept of Purchasing Power Parity which is based on the number of units of a country's currency required to buy the same amounts of goods and services in the domestic market as one dollar would buy in the United States.

Because the analysis of costs-per-beneficiary-per-year only looks at the costs and not at the results achieved by these costs, it is not appropriate as the sole basis for choosing between ECD programs. More elaborate methods of assessing costs in relation to the benefits are required.

Affordability

An analysis of affordability – the ability to pay or to find sufficient resources--, either at the individual or the national level, might be useful in some cases. This method is sometimes referred to as a cost-feasibility analysis, referring to estimating costs of a program in order to ascertain whether or not it should be considered in the first place. That is, if the cost of a program option exceeds the budget or resources available, there is no need to continue analyzing the particular program.

To put costs into perspective, relate them to some indicator of the economic context in which the project operates. This indicator could be the average household income, the level of minimum wage, per capita GDP, total government expenditures in the sector or at a particular level, etc.

For instance, whenever the cost per beneficiary is very high relative to average household income, it is obvious that families will not be able to pay the needed contribution themselves. A decision between changing the program or providing public funding is necessary. Whenever the public funding needed to operate the program exceed the available budget (and other resources), another type of program should be considered.

This analysis will be useful in the extreme cases where it is possible to estimate which percentage of income, per capita GDP or government expenditures, is still reasonable. Mostly however, the costs will be somewhere in between the obvious boundaries.

Cost-Effectiveness

A cost-effectiveness analysis takes into account both costs and the benefits derived from programs in order to evaluate and compare different alternatives with similar goals. A program or project will be more cost-effective if it leads to better outcomes while incurring the same costs as the alternatives, or if it produces the same results at fewer costs.

The benefits in a cost-effectiveness study need not be measured in terms of money (that would be a cost-benefit analysis). Rather, the programs need to have similar goals that can be compared. Find a common measure of effectiveness to assess the programs (for example: improvement in nutritional status à reduction in % of malnourished children; increased cognitive development à test scores after a year of preschool, or performance in primary school; physical location for a child care center à construction of a building according to set safety, health and other criteria).

There are strong indications that quality care is minimally more expensive than poor care. According to a recent study, only one in seven U.S. centers provides child care of a quality that promotes healthy development and learning. Almost half of the infants and toddlers in the 401 child care facilities observed spent their days in rooms of less than minimal quality. As might be expected, states with less stringent standards had a larger number of poor quality child care centers and classrooms. Yet the same study found that better-quality services cost, on average, just 10 percent more than mediocre care. These findings suggest that modest investments, combined with reasonable regulation could significantly improve the efficacy of early child care interventions. (Helburn 1995)

Cost/Benefit Analysis

A cost/benefit analysis evaluates a program by comparing its costs and benefits, both measured in monetary terms. The outcome of the analysis – the benefit to cost ratio - makes it possible to compare ECD project with projects in other sectors. It is not an easy task to perform a cost/benefit analysis. First, the analysis needs to consider all costs regardless of the source of financing. Second and even more important, it is necessary to assign a value in terms of money to all benefits. These benefits can range from the direct improvements in health, education, or social development of the child, to the longer term reductions in grade repetition, school drop-out, delinquency, fertility, or welfare utilization and long term improvements in productivity, earning power or participation in society.

Longitudinal studies on the long-term impact of early childhood interventions provide considerable support for high benefit-to-cost ratios of Early Childhood Development programs.

Van der Gaag and Tan (1998) provide a very useful framework for estimating the economic benefits of early child development programs and apply it to preliminary data from the PIDI project in Bolivia. "Economic benefits" refer to the monetary value of the benefits in health, nutritional status, and cognitive and social development that accrue to the children who enroll in ECD programs. To these benefits we need to add benefits to the mother and other family members, to the neighborhood in which the children centers operate, and to society as a whole.

Based on the benefits that the authors are able to quantify, the preliminary results for Bolivia show that ECD programs that are (1) well targeted and (2) have a major impact on school enrollment and achievement are excellent economic investments. The authors also argue that if one adheres to some modest notion of social justice, ECD programs should be subsidized for children who are born and grow up in the most deprived segments of society:

  • Van der Gaag, Jacques & Jee-Peng Tan. 1998. The Benefits of Early Child Development Programs: An Economic Analysis. Washington, D.C.: World Bank.
  • Keynote address "Investing in the Future", by Jacques van der Gaag, given at the Atlanta Conference "Early Child Development: Investing in the Future", The Carter Center, April 8-9,1996.
  • See also: ECD calculator

Other studies that have performed cost/benefit-analyses of ECD programs in developing countries are:

  • Behrman, J.R., Y. Cheng & P. Todd (2000), "The Impact of the Bolivian Integrated 'PIDI' Preschool Program". Philadelphia: University of Pennsylvania.
  • Paes de Barros, R. and R. Mendonça (1999). "Costs and Benefits of Pre-school Education in Brazil." Rio de Janeiro: Institute of Applied Economic Research.
  • Glewwe, P., H.G. Jacoby and E.M. King (2001), "Early Childhood Nutrition and Academic Achievement: A Longitudinal Analysis". In: Journal of Public Economics, vol 81(3), pp. 345-368.

Examples of cost/benefit-analysis of US program:

  • The High/Scope Perry Preschool Project study which estimated the returns of the program to the public to be as high as US$ 7.16 for every dollar invested.
  • Schweinhart, L.J., H.V. Barnes & D.P. Weikart, with W.S. Barnett & A.S. Epstein. 1993 "Significant Benefits: The High/Scope Perry Preschool Study Through Age 27". Ypsilanti, Michigan: High/Scope Educational Research Foundation.
  • Early Childhood Nutrition and Academic Achievement: A Longitudinal Analysis (By Paul Glewwe, Hanan G. Jacoby, and Elizabeth M. King (2001)).

References

  • Evans, J.L. with R.G. Myers & E.M. Ilfeld. 2000. " Early Childhood Counts: A Programming Guide on Early Childhood Care for Development". Washington, DC: World Bank.
  • Van der Gaag, Jacques & Jee-Peng Tan. 1997. The Benefits of Early Child Development Programs: An Economic Analysis. Washington, D.C.: World Bank.
  • Waiser, M. 1998. "Early Childhood Care and Development Programs in Latin America: How much do they cost?". Latin America and Caribbean Regional Office, Human Development Department, LCSHD Paper Series no. 19, Washington, DC: World Bank.
  • Wilson, S. 1995. "ECD Programs: Lessons from Developing Countries". PHN Draft. Washington, DC: World Bank.
  • Helburn, Suzanne, Mary L. Culkin, and others. 1995. "Cost, Quality, and Child Outcomes in Child Care Centers: Executive Summary." (Denver, CO: University of Colorado at Denver
  • ECD calculator (click here)