The Economics of Child Well-Being

The graph is from the  chapter "The Economics of Child Well-Being" by Conti  and Heckman (October 20112).

They explain:

Figure 11, which shows the return to a unit dollar invested by stage of the lifecycle. This graph captures the returns to a hypothetical investor who is deciding where to place his/her money in the life of a newborn. From a purely economic standpoint, the highest return to a unit dollar invested is at the beginning of the lifecycle since it builds the base that makes later returns possible. One important point to clarify is that the argument to invest in child well-being does not say that there is no return to schooling or later investment. Indeed, for those with a good base, the economic benefits are substantial (see Carneiro et al. [2003]). The high early returns arise in part because they promote substantial benefits for later life investment. The logic suggested by this figure should be to promote a policy of prevention, rather than remediation, since it is much more cost-effective to help disadvantaged children earlier on than to remediate later on. Yet despite the evidence, society underinvests in disadvantaged young children. Less-educated women tend to be single parents. They work in low wage jobs and do not invest much in their children. More educated women, even if single mothers, are not only working more, but also investing more in their children – effectively increasing the gap between the advantaged and the disadvantaged (McLanahan, [2004]). As a result, inequality is being perpetuated -- and even increased -- across generations. The solution to this problem is to invest in the promotion of child capabilities beginning at conception.

HT: Viviana Di Giovinazzo.