# 10. Returns to Early Interventions at Sufficient Scale Are High

_<mark>Sergio Schmukler, Michael Toman, and Adam Wagstaff</mark>_ Research shows that the benefits of early interventions at a scale sufficient to have real impact are large in many areas of economic development. However, behavioral, financial, institutional, and political constraints mean that interventions are not always implemented in a timely or adequate way. Uncertainty compounds the problem, as decision makers must balance the certain up‐front costs of early interventions with the uncertain future benefits. These considerations lead to too late and/or too small actions by individuals, businesses, and governments. The resulting missed opportunities can be very costly for society at large.

## **Early childhood interventions in education and health**

Education and health interventions in early childhood have large returns. In part, this is because key stages in a child’s development happen during the early years of a child’s life. Early brain development is threatened – possibly irreversibly – by nutrient deficiencies, stress, disease and under‐stimulation. Interventions very early in a child’s life reduce the risk of this happening, whether through improved nutrition, an improved health environment or parental stimulation. These interventions can have long‐ lasting effects in terms of cognitive capacity in later life, as reflected in better learning outcomes at school and higher wages once the child transitions to adulthood and joins the labor market.<sup>107,108</sup> The period over which returns accrue is therefore very long. By contrast, the costs of early childhood interventions occur over just a few years. But even after discounting to present values, the benefit‐cost ratio is large – one package of early childhood nutrition interventions has been estimated recently to have a benefit‐cost ratio of 15:1 and a rate of return of 17%.<sup>109</sup> In addition, and not accounted for in these calculations, preschool interventions can have <u>indirect</u> benefits too by making children better able to benefit from instruction during their years of formal schooling, and hence making these later investments more productive. Empirical work supports this idea that early investments enhance the productivity of (i.e., are complementary to) later investments: a recent study in the United States found that increases in K12 spending were more efficacious for poor children who benefitted from higher levels of Head Start spending during their preschool years.<sup>110</sup> Despite these high returns to preschool investments, the high rates of childhood stunting (a physical manifestation of inadequate nutrition and an adverse disease environment during the child’s first 1,000 days) in developing countries suggest underinvestment. This underinvestment may be due to the fact that the costs are incurred now, and the benefits accrue only after the child reaches adulthood, and that families and policy makers discount the future more heavily than economists assume. But it could also be

> 107 Grantham‐McGregor S, Cheung YB, Cueto S, Glewwe P, Richter L, Strupp B, International Child Development Steering G. Developmental Potential in the First 5 Years for Children in Developing Countries. _Lancet_ 2007; 369(9555): 60‐70.

> 108 Galasso E, Wagstaff A. The Aggregate Income Losses from Childhood Stunting and the Returns to a Nutrition Intervention Aimed at Reducing Stunting. _Economics & Human Biology_ 2019; 34: 225‐38.

> 109 Galasso E, Wagstaff A, Naudeau S, Shekar M. The Economic Costs of Stunting and How to Reduce Them. _Policy Research Note, World Bank, Washington, DC_ 2016.

> 110 Johnson RC, Jackson CK. Reducing Inequality through Dynamic Complementarity: Evidence from Head Start and Public School Spending. _American Economic Journal: Economic Policy_ 2019; 11 (4): 310‐49.

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