ABSTRACT
The economic argument that early childhood education and care (ECEC) yields high rates of return has contributed to increased attention to public funding for ECEC in the United States and globally. This chapter reviews the advances in theory and applied research contributed by economics to the ECEC field, the economic rationale for public investments in ECEC, and the evidence regarding the economic returns to ECEC and the economic rationale for public funding. Economics has put forward three primary rationales for public investments in ECEC: equity and redistribution, market failures, and economic returns. Market failures result from information problems, liquidity constraints (and credit market failures), and/or externalities. Information problems can arise if parents have difficulties correctly assessing the quality of ECEC or its impacts on child development that might lead them to underinvest in ECEC. As a field, economic analysis of ECEC is still quite young. Investments in its healthy development might well produce its own impressive long-term benefits.
