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Using Benefit-Cost Analysis to Scale Up Early Childhood Programs through Pay-for-Success Financing

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  • Temple, Judy A.
  • Reynolds, Arthur J.

Abstract

Increasing access to effective preschool programs is a high priority at local, state, and federal levels. Recently, two initiatives to expand preschool programming in Illinois and Utah have used funds from private investors to scale up existing programs. Private-sector social impact investors provide funding to nonprofit or public preschool providers to increase the number of children served. If the measured outcomes from preschool participation meet predetermined goals, then the estimated government cost savings arising from these preschool interventions are used to repay the investors. Social impact investing with a “Pay-for-Success” contract can help budget-constrained governments expand proven or promising preventive interventions without the need to increase taxes. Benefit-cost analysis (BCA) plays a crucial role in helping to identify which social, educational, or health interventions are suitable for this type of innovative financing. Benefit-cost analysts are needed to design the structure of the success payments that the government will make to the private investors. This paper describes social impact borrowing as a new method for financing public services, outlines the contribution of BCA, and discusses the innovative use of social impact financing to promote scaling evidence-based Child-Parent Centers and other early childhood programs.

Suggested Citation

  • Temple, Judy A. & Reynolds, Arthur J., 2015. "Using Benefit-Cost Analysis to Scale Up Early Childhood Programs through Pay-for-Success Financing," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 6(3), pages 628-653, October.
    • Handle: RePEc:cup:jbcoan:v:6:y:2015:i:03:p:628-653_00
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    Cited by:

    1. Abdellah Kabli & Alessandro Rizzello & Annarita Trotta, 2021. "Roadmapping New Impact Bonds in a Post-COVID World: Insights from Case Studies in the Education Sector," Sustainability, MDPI, vol. 13(8), pages 1-16, April.
    2. Eleonora Broccardo & Maria Mazzuca & Maria Laura Frigotto, 2020. "Social impact bonds: The evolution of research and a review of the academic literature," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 27(3), pages 1316-1332, May.
    3. Richardson, Brandt A. & Reynolds, Arthur J. & Temple, Judy A. & Smerillo, Nicole E., 2017. "School readiness in the Midwest Child-Parent Center Expansion: A propensity score analysis of year 1 impacts," Children and Youth Services Review, Elsevier, vol. 79(C), pages 620-630.

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