There is no other economic activity, where costs and benefits are as far apart in time and where investors and beneficiaries are as detached as is the case for investments in human capital. The largest part of investments in capacity formation takes place from the moment of conception until school age, while returns (employment, earning, and occupation) are realized mostly in adulthood. During childhood parents are the most important investors. Apart from the parents, starting with school age, educational institutions invest in academic competencies like reading and math. In adulthood the individual benefits from returns to human capital investments, as well as her family and the society, e.g. through higher taxes. This study argues that inequality in investments during pre-school age is one of the most important reasons for the inequality of outcomes in school and adult life. In early childhood, capacities are built (or not built), mainly in the family, through interactions between children and parents. Differences in the availability of adequate emotional interaction and resources (“floor freedom”, “parental responsiveness”, …) during childhood are formative in the sense that a later catch-up is hard to achieve. During the transition from primary to secondary education financial constraints due to economic poverty in the family and imperfect credit markets for adolescent children create an additional barrier to investments into higher education. For instance, 74% of the children which grow up without organic and psychosocial risks at birth attend the highest secondary school track, compared to only 15% of the children who grew up with both risks. A 10% improvement in the quality of parental care in infancy is associated with a 5.5% improvement in child development. The strength of this relationship is reduced to less than 2% once upon school age is reached. The inequality of parental care before school age therefore remains critical fro competence formation, despite compulsory schooling, high educational expenditures and substantial wealth in modern economies. In addition to the individual distress associated with adverse child outcomes, the latter causes significant costs to society e.g. to the education and the health care systems. Medical research for instance suggests that parental neglect and violence during childhood increases the susceptibility to depression, and inflammations during adulthood. Furthermore, it increases the probability of academic failure. To foster human capital, policy should further improve the availability of adequate parental assistance for disadvantaged children of preschool age. In addition, it is necessary to support and accompany these children until adolescence in an ageappropriate and individual way. For adults, who have not received adequate investments during pre-school age compensating measures are required, whose design and effectiveness are subject to further investigation.
Pfeiffer, Friedhelm (2009), Entwicklung und Ungleichheit von Fähigkeiten: Anmerkungen aus ökonomischer Sicht, ZEW Discussion Paper No. 09-025, Mannheim. Download