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Cited by 572Economic and Fiscal StudiesPolitics, Economics, and Education PolicySocial Policy and Reform Studies

A unified welfare analysis of government policies.

Open access
Hendren, Nathaniel, Sprung-Keyser, Ben·2020·The Quarterly Journal of Economics
DOI 10.1093/qje/qjaa006
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Abstract

We conduct a comparative welfare analysis of 133 historical policy changes over the past half-century in the United States, focusing on policies in social insurance, education and job training, taxes and cash transfers, and in-kind transfers. For each policy, we use existing causal estimates to calculate the benefit that each policy provides its recipients (measured as their willingness to pay) and the policy’s net cost, inclusive of long-term effects on the government’s budget. We divide the willingness to pay by the net cost to the government to form each policy’s Marginal Value of Public Funds, or its ``MVPF''. Comparing MVPFs across policies provides a unified method of assessing their effect on social welfare. Our results suggest that direct investments in low-income children’s health and education have historically had the highest MVPFs, on average exceeding 5. Many such policies have paid for themselves as the government recouped the cost of their initial expenditures through additional taxes collected and reduced transfers. We find large MVPFs for education and health policies among children of all ages, rather than observing diminishing marginal returns throughout childhood. We find smaller MVPFs for policies targeting adults, generally between 0.5 and 2. Expenditures on adults have exceeded this MVPF range in particular if they induced large spillovers on children. We relate our estimates to existing theories of optimal government policy, and we discuss how the MVPF provides lessons for the design of future research.

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  • Changes in family economic circumstances have relatively larger associations with children's educational attainment when they occur during adolescence than when they occur earlier in childhood.

    “One example is the observation that changes in family economic circumstances have relatively larger associations with children's educational attainment when they occur during adolescence than when they occur earlier in childhood.8”

    From Critical Periods in Child Development and the Transition to Adulthood (2021) · cites this paper as [8]

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Authors
Hendren, N., & Sprung-Keyser, B.
Affiliations
Harvard University (US)
ORCID
Venue
The Quarterly Journal of Economics
Publisher
Oxford University Press (OUP)
Published
2020-03-05
Volume
135
Issue
3
Pages
1209-1318
ISSN
  • 0033-5533 (ISSN-L)
  • 1531-4650
DOI
10.1093/qje/qjaa006
OpenAlex
W3181398236
Cited by
571
References
164
Citations by year
2026: 83 · 2025: 93 · 2024: 106 · 2023: 95 · 2022: 90 · 2021: 55 · 2020: 28 · 2019: 20 · 2018: 1
FWCI
56.98
Type
journal article
Language
en
Open access
Licence
Locations
  • The Quarterly Journal of Economics (publishedVersion, cc-by)
  • RePEc: Research Papers in Economics (submittedVersion)
Funders
  • National Science Foundation (1653686, 1745303)
  • Bill and Melinda Gates Foundation
  • Alfred P. Sloan Foundation
Topics
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Economic and Fiscal Studies
  • Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Politics, Economics, and Education Policy
  • Social Sciences › Political Science and International Relations › Social Policy and Reform Studies
Keywords
marginal value of public funds, social insurance, education policy, job training, taxation, cash transfers, in-kind transfers, willingness to pay, public budget

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