Measuring Investment in Human Capital Formation: An Experimental Analysis of Early Life Outcomes

The literature on skill formation and human capital development clearly demonstrates that
early investment in children is an equitable and efficient policy with large returns in
adulthood. Yet little is known about the mechanisms involved in producing these long-term
effects. This paper presents early evidence on the nature of skill formation based on an
experimentally designed, five-year home visiting program in Ireland targeting disadvantaged
families - Preparing for Life (PFL). We examine the impact of investment between utero to 18
months of age on a range of parental and child outcomes. Using the methodology of Heckman
et al. (2010a), permutation testing methods and a stepdown procedure are applied to account
for the small sample size and the increased likelihood of false discoveries when examining
multiple outcomes. The results show that the program impact is concentrated on parental
behaviors and the home environment, with little impact on child development at this early
stage. This indicates that home visiting programs can be effective at offsetting deficits in
parenting skills within a relatively short timeframe, yet continued investment may be required
to observe direct effects on child development. While correcting for attrition bias leads to
some changes in the precision of estimates, overall the results are quite similar.