Methodology for Estimating the Costs and Benefits of Youth Development
Programs
Nia Harrison, Nikola Juris, Dori Stern, and
Steven Stern
Department of Economics,
March 2008
Roadmap
There are six steps involved in performing the costbenefit analyses: 1) choose programs to analyze; 2) measure/estimate the effects of the program on behavior; 3) estimate the annual benefits of behavior change; 4) compute longterm benefits of behavior change; 5) perform sensitivity analyses; and 6) report results. Each of these is described below.
Choosing Programs to
Evaluate
We surveyed the literature looking for youth development programs that had been evaluated using a control group and showing some concern for selection issues. While we identified many such studies, we do not claim to have done a comprehensive search of the literature. Based on the perceived quality of the analyses, we chose to proceed further with evaluations of the programs listed in Table 1.
Identified
Programs 

Programs 
Author of Evaluation 
Focus of Program 
Resolution 
AllStars Programs 
McNeal et al. (2004) 
drug prevention 
not kept 
Big Brothers/ Big Sisters of 
Tierney, Grossman, & Resch (1995) 
mentoring 
kept 
Boys and Girls Clubs 
Schinke, Cole, & Poulin (2000) 
after school 
not kept 
Career Academies 
Kemple, J. and J. ScottClayton (2004) 
high school graduation 
kept 
Children at Risk Programs 
Harrell et al (1999) 
multiple goals 
kept 
Drug Education Classes 
Hansen & Graham (1991) 
drug prevention 
kept 
Job Training Partnership Act Programs 
Bloom et al. (1997) 
job training 
kept 
Life Skills Training Programs 

drug prevention 
kept 
Service Learning Programs 
Uggen & Janikula (1999) 
service learning 
kept 
Sponsor a Scholar Programs 
Johnson (1999) 
college preparation 
kept 
Teen Outreach Programs 
Allen et al. (1997) 
service learning 
kept 
Twentyfirst Century Community Learning Programs 
Dynarski et al. (2003) 
after school 
not kept 
Upon closer evaluation of the
studies, we chose not to proceed with a few programs. For Boys and Girls Club, we chose not continue
because the analysis showed that children participating in Boys and Girls Club
were more likely to participate in a set of unhealthy behaviors than those who
did not participate. It looked like this
was the result of a selection problem; the unobserved part of the value of
participating was positively correlated with the unobserved part of the value
of engaging in the unhealthy behaviors.
Since Schinke, Cole, &
Poulin (2000) made no attempt to control for such correlation, the program
seemed to encourage unhealthy behavior.[1] We looked for another evaluation of the Boys
and Girls Club and were not successful in finding one, and we were not
successful in receiving one from the local chapter either.
We also chose not to proceed with the AllStars program and the Twentyfirst Century Community Learning programs because, in both cases, the analyses suggested that the programs were not effective. We have no reason to think these are analyses are wrong, and we have not evaluated the studies with enough care to determine if they have significant problems. In either case, there was no point in proceeding with a costbenefit analysis given the results.
Measuring Program
Effects on Behavior
Each of the analyses provides direct estimates of the effects of the relevant program on different aspects of behavior. We take these estimates as given. In some cases, the respective researcher did not measure changes in a particular type of behavior, and we made a “reasonable guess” of the effect. A good example of this type is a program that measures changes in drug abuse but no changes in high school completion. In such cases, using another source,[2] we estimate the effect of drug usage on high school completion and then multiply the two effects to estimate the effect of the program on high school completion. In all such cases, we also do sensitivity analyses to measure the effect of different “reasonable guesses” on our bottomline estimates. In other cases, either when we think it is too difficult to make a “reasonable guess” or where a reasonable conservative guess would be no effect, we assume that there is no effect. A good example of this is not including an effect on criminal activity for Teen Outreach because it was not considered by Allen et al. (1997).[3]
One also needs to be aware of potential differences in estimation methodology in the original analyses affecting results. The best example of this is the effect of service learning programs on teen pregnancy. Allen et al. (1997) estimate that the program they analyzed, Teen Outreach, reduced teen pregnancy by 1.7%, while Uggen and Janikula (1999) estimate that the program they analyzed, Service Learning, reduced teen pregnancy by 5.6%, more than three times as much. The critical question is whether this difference represents a difference in estimation methodology or a difference in some critical characteristic of the program. If it is the former, then the resulting difference in longterm benefits is not meaningful. If it is the latter, then it would be worthwhile to understand the differences in the program. Another similar example is the very large reported effects of drug education classes in Hansen and Graham (1991). There are other, more recent, empirical evaluations of such programs that are much more pessimistic about their effectiveness.[4] Is it that the estimation methodology changed, that kids have changed, or that the program has changed? Disentangling these types of effects is beyond the scope of this project.
One way to deal with uncertainty about program effects is to use reported standard errors in the empirical analysis in a sensitivity analysis. This is discussed in more detail below.
An important point to keep in mind here is that we are conditioning on the estimates provided in the empirical analyses. To the degree that these effects are estimated with error (as is true of all estimates), our results may be incorrect. While there are other sources of randomness in the remainder of the analysis, the randomness inherent in the estimated program effects is probably the largest source of error. In doing a critical analysis of the reported longterm benefits here, one should be careful to specify with which estimates and/or assumptions one is concerned.
Estimating the Annual
Benefits of Behavior Change
Conditional on estimates of program effects on behavior, we must next translate those estimated effects into annual (monetary) benefits. We do this on a casebycase basis. Note that some of the monetary benefits discussed below accrue to the program participant (e.g., increased future wages) while some accrue to society in general (e.g., savings on incarceration costs). Throughout the analysis, we do not distinguish between private and societal costs and/or benefits. They matter only to the degree that a policy analyst might worry about who should pay for a particular program; potential program participants will be willing to pay only for those services that result in large private gains.
1) High School Completion: The major implication of completing high school is that one’s wages/earnings increase significantly. Card (1999) reports that, holding other characteristics constant, having a high school diploma increases one’s wage by 46%. In all of our base cases, we assume that a male (female) high school graduate earns $15.00 ($13.50) per hour[5] and work 2000 hours per year. This implies annual earnings of $30,000 ($27,000) for males (females). Given the estimate in Card (1999), the annual earnings benefit of finishing high school is $13,800 ($12,420) for males (females). The annual benefit associated with an increased probability of graduating high school is the annual benefit of having a high school diploma multiplied by the increase in the probability of graduating high school. For example, Bloom et al. (1997) estimate that JTPA increases graduation rates by 0.5% (7.7%) for males (females). Therefore, the annual benefit associated with participating in JTPA is 0.5%*$13,800 =$690 (7.7%*$12,420 = $956) for males (females). Relying on similar estimates in Card (1999) and using a similar calculation, we can compute the benefit of any program’s effect on the probability of getting higher levels of education. Note that all of this benefit is enjoyed by the program participant. We ignore any value that the general community might place on having a more educated populace. This is not to say that no such benefit exists; rather it is too hard to measure.
For some programs, we impute the program’s effect on the probability of graduating from high school. For Children at Risk, we assumed that the ratio of the effect of Service Learning on the probability of finishing high school divided by the effect of Service Learning on the probability of being arrested is equal to the ratio of the effect of Children at Risk on the probability of finishing high school divided by the effect of Children at Risk on committing crimes. Also, we assume that the effect of Life Skills Training on the probability of graduating from high school is the same as for Children at Risk.
2) College Entry: As with high school completion, the major implication of college entry is that one’s wages/earnings increase significantly. We use Card (1999) and Hinton et al. (2008) to estimate that, holding other characteristics constant, entering college increases one’s wage by 26.9%.[6] We make the same assumptions about average wages for males (females) and work hours. The rest of the methodology is the same as for high school completion.
2) Crime Reduction: There are three major financial implications of crime reduction: a) savings associated with incarceration costs; b) increased wages associated with not having a criminal record; and c) avoided costs to crime victims. Note that (a) and (c) are public gains, while (b) is a private gain.
For (a) savings associated with incarceration costs, Rory Carpenter (from the Commission on Children and Families) provided us with information on the annual cost of incarceration: $32,560. We assume (obviously incorrectly) that all arrests lead to jail time and calculate the annual benefit of the reduced arrest probability as $32,560 multiplied by the change in arrest probability. The other critical issue here is how long people stay in jail and the recidivism rate. These are discussed in more detail below.
For (b) increased wages associated with not having a criminal record, [citation needed][7] reports that, holding other characteristics constant, spending time in jail reduces one’s wage by 28.4%. We multiply 28.4% by high school earnings and by the change in the probability of being arrested to estimate the annual private benefit of crime reduction. Note that we ignore the facts that, while one is in jail, one can not earn money and that being in jail is not fun. Without that much trouble, we could account for the lost wages while in jail. Accounting for the disutility of being in jail would be significantly more difficult though probably larger in magnitude.
For (c) avoided costs to crime
victims, using numbers in [citation needed],
we estimated that the average cost to a victim of crime is $3300. The other problem with estimating the benefit
to reduced criminal activity is that most of our reported results are in terms
of reductions in the probability of being arrested, and being arrested is not
equivalent to committing a crime. [citation needed] report that the probability of
being arrested, conditional on committing a crime is 8.8% nationally. Given this number, we need to divide our
reported changes in arrest probabilities by 8.8% to compute changes in criminal
activity. For example, Bloom et al. (1997) find that arrest
probabilities for boys decrease by 7.7%, implying that crimes decrease by
7.7%/8.8% = 0.875.
3) Reductions in Substance Abuse: Different authors use different measures of
substance abuse reported in Table 2. We
ignore the shortterm use of gateway drugs in Harrell et al. (1999) because we
think the longer term effect is more important, and we ignore selling drugs
because we do not know how to quantify its cost. Next, we treat using drugs in Tierney,
Grossman, and Resch (1995), longterm use of using drugs in Harrell et al
(1999), using marijuana in Hansen and Graham (1991), and using drugs in
To compute the benefit associated
with reduced drug abuse, we adjusted estimates from French et al. (2002) to fit
a oneyear time period and calculated that the annual benefit of not using
drugs is $5,103. We assumed that the annual
benefit of not getting drunk was the same as the annual benefit of not using
drugs and that the annual benefit of not using alcohol was 1/3 of the annual
benefit of not using drugs or getting drunk.
Given these assumptions, the annual benefits of the programs’ effects on
substance abuse are the effects on behavior multiplied by the benefit
associated with not participating in the behavior. For example, given the reduction in longterm
use of drugs of 7.0% caused by Children at Risk as reported in Hansen and Graham
(1991) and the annual benefit of not using drugs of $5,103, the annual benefit
of the reduction in drug use caused by Children at Risk is estimated to be
$5,103*7% = $357.
Table 2 

Program 
Author 
Measures 
Big Brothers/ Big Sisters 
Tierney, Grossman, and Resch (1995) 
using drugs, using alcohol 
Children at Risk 
Harrell et al (1999) 
shortterm using gateway drugs, longterm using drugs, longterm
selling drugs 
Drug Education Classes 
Hansen and Graham (1991) 
using alcohol, getting drunk, using marijuana,
using cigarettes 
Life Skills Training 

using drugs 
4)
Reductions in Teen Pregnancy, STDs:
As was true for substance abuse, different analyses measure different
components of the problem here as reported in Table 3. We treat the measures for Service Learning in
Uggen and Janikula (1999) and
for Teen Outreach in Allen et al. (1997) as measuring the same thing. We use the estimate of the annual cost to a
mother of being a pregnant teen of $3,700 from Strategic Planning Group
(1999) which itself relies heavily on estimates in Maynard (1996). Maynard finds that the effects of pregnancy
for boys are statistically insignificant, and we conservatively follow her
lead. We assume that the probability of getting an STD conditional on having
multiple sex partners is 12.5% and the cost of getting an STD is $2000,
implying an annual benefit of not having multiple sex partners of $2000*12.5% =
$250. Also, we assumed that the probability
of getting pregnant conditional on having sex when drunk or high was 2%.
Table 3 

Program 
Author 
Measures 
Life Skills Training 

having multiple sex partners, having sex when drunk or high 
Service Learning 
Uggen & Janikula (1999) 
pregnancy before age 18 
Teen Outreach 
Allen et al. (1997) 
getting pregnant 
Computing LongTerm Benefits
of Behavior Change
The basic idea in computing longterm benefits of behavior change is to take a stream of annual benefits, discount each element of the stream appropriately, and add up. First, we discuss some of the details of computing present values, and then we discuss details particular to this project.
Consider comparing the value of receiving a dollar today relative to receiving a dollar one year from today. The dollar received today is more valuable than that received one year from now because there is value in having it sooner. At a minimum, one could take a dollar today, invest it in an asset providing an annual rate of return r, and have (1+r) one year from now. Also, it might be that individuals discount future rewards basically because they are impatient. This may be especially true for youth. We define the discount rate as the rate at which one discounts the future. For example, if the source of discounting is the opportunity to earn interest in an asset at rate r, then r is the discount rate. We define the discount factor as the value of $1 one year from now. For example, if the source of discounting is the opportunity to earn interest at rate r, then the discount factor is β = 1/(1+r). We define the present value of some flow X, received one year from today, as the value of the flow today: βX. Note that, if we received βX today, we could invest it at rate r and have (1+r)βX = (1+r)X/(1+r) = X one year from today.
Next, consider comparing the value of receiving X today relative to receiving X in n years from today. If one invests X today for n years, then, at the end of n years, one will have (1+r)^{n} X. If one receives β^{n}X = X/(1+r)^{n}. today and invests it for n years, then, at the end of n years, one will have (1+r)^{n} X/(1+r)^{n} = X. Thus, the present value of X received n years in the future is β^{n}X.
Finally, consider an investment opportunity where one pays C today and then receives x once a year starting in one year from today for T years. Our goal is to compute the net present value of the investment. The cost C is paid today, so there is no discounting. The amount received in year t for some 1≤t≤T is β^{t}x. If we add up the discounted costs and benefits, we get
NB = C + βx + β^{2}x + … + β^{T}x.
This simplifies to[9]
NB = C + [β (1β^{T+1})x/(1β)].
Note that this converges to
NB = C + [β x/(1β)]
as T → ∞ (because, since 0 < β < 1, β^{T}. → 0 as T → ∞). Also note that the last few terms of a sum with a large terminal point T are very small; this implies that, for investments with long payoff periods, we can approximate the net present value by assuming that the payoffs continue indefinitely.[10] Sometimes 1/(1β) is called the multiplier. For a more comprehensive discussion on net present value, one can refer to almost any elementary economics or finance text book (for example, see Frank and Bernanke, 2007, 232 – 235)
For this project, we can think of participation in each of the programs as an investment. There is a per capita program cost paid at the time of participation, and then there are future benefit flows. For each program either the author of the program analysis reported the per capita cost or we estimated its cost. The future benefit flows are the annual benefits (prior to discounting) discussed in the previous section. For the majority of cases in this project we approximate the net discounted value as –C + [X/(1β)] where X is the annual benefit associated with some estimated change in behavior caused by the program.
There are some special cases specific to this project that are worth discussing:
1) Many of the programs were reported to reduce arrest probabilities. We need to make an assumption about how long people stay in jail and how likely they are to return to jail. Let K be the average number of years spent in jail and let H be the hazard rate for returning to jail. Then the proportion of time one spends in jail over a lifetime is P = KH/[(K1)H+1]. As K becomes large, P converges to 1, and, as H converges to one (complete recidivism), P converges to 1. For most of the analysis we set P = 1. This may be too extreme an assumption. However, it is balanced by some of the costs of crime we ignore.
2) Throughout the analysis we assume that the cost to victims of crime is a oneshot cost. Thus, we do not multiply it by any multiplier. This is consistent with assuming that someone commits a crime never commits another crime. This is also somewhat unreasonable but is balanced against the strong assumptions in (1) above.
It is worth considering how the assumptions made with respect to crime affect the analysis. Throughout the analysis, for the base case, we use an annual cost of jail of $32,560, a cost to victims of $3,300, and cost of reduced future wages of $8,520. In Table 4, we assume a discount factor of 0.9 and consider the benefits of a program that reduces arrest probabilities by 5%. In the base case, with the proportion of time one spends in jail P equal to 1, no crimes committed after arrest, and no lost wages due to time spent in jail, the present value of incarceration (jail) is $16,280, the present value of victim loss is $1,875, and the present value of lost earnings (due to a lower wage rate) is $4,260, leading to total benefits of $22,415. If, instead we assume that, conditional on being arrested, one spends half of his discounted life[11] in prison (P = .5) while holding all other assumptions constant, the benefits associated with reduced jail time declines to $8,140 leading to an overall decline to $14,275. If we assume instead that P = 0.2, the benefit of reduced jail time becomes $3,256, and the benefit or reduced arrest probabilities falls to $9,391.
Table 4 


Jail 
Victim 
Lost Earnings 
Total 
Annual Cost 
$32,560 
$3,300 
$8,520 

Annual Cost * ΔPr(Arrest) 
$1,628 
$1,875 
$426 

P = 1 
$16,280 
$1,875 
$4,260 
$22,415 
P = .5 
$8,140 
$1,875 
$4,260 
$14,275 
P = .2 
$3,256 
$1,875 
$4,260 
$9,391 
# Crimes Proportional to Time
in Community, P = 1 
$16,280 
$1,875 
$4,260 
$22,415 
# Crimes Proportional to Time
in Community, P = .5 
$16,280 
$9,375 
$4,260 
$29,915 
No Earnings While in Jail, No
HS, P = 1 
$16,280 
$1,875 
$162,000 
$180,155 
No Earnings While in Jail, No
HS, P = .5 
$8,140 
$1,875 
$104,004 
$114,019 
We may want to measure the sensitivity of results with respect to the assumption that one stops committing crimes after being arrested. In fact, this is inconsistent with assuming a high recidivism rate. If instead we assume that one commits crimes at the same rate after arrest (and release from prison) as before arrest, then the results depend on P. If P = 1, then committing crimes does not increase because one never leaves prison. If P falls to 0.5, then the benefits to crime victims of the program increases to $9,375.
We also may want to measure the benefit associated with being able to work more because arrest probabilities decline. This again depends critically on P, and also it depends on the wage rate one assumes. With respect to the latter assumption, we assume that the relevant person would have earned 56% of a high school graduate wage (the effect of not graduating from high school) had they not been in jail. With respect to the former assumption, if P = 1, then their amount of time lost for working is large and the benefit associated with reduced arrest probabilities is $162,000. If P = 0.5, then program benefit is $104,004. These are obviously large costs.
A subtler point is that the benefit of the programs’ effect on arrest probabilities depends on the effectiveness of programs to reduce recidivism. If OAR[12] becomes more effective and P declines, then the value of keeping youth out of criminal activity declines.
3) There is some
concern that many of the estimated program effects reported in the studies
listed in Table 1 are temporary effects.
For example, it might be that Life Skills Training reduces the
probability of using drugs by 4.7%, as reported in
However, an alternative way for programs to deal with deteriorating effects is to provide services to the participating youth for a longer period of time. We implement this suggestion in our sensitivity analyses by considering the alternative scenario where youth are assumed to participate in the program every year until they reach age 18 and pay the same annual cost each year. This brings the gross benefits (prior to subtracting cost) back to where they were before assuming program effect deterioration, and it increases the cost from C to C + βC + … + β^{n}C = C(1β^{n+1})/(1β) where n is the number of years one is assumed to participate in the program.
Performing Sensitivity
Analyses
Throughout the analysis, we need to make assumptions about unobserved parameters. To the degree allowed by availability of previous research and time constraints, we have tried to base those assumptions on reliable information. In some cases, we are left to make wild guesses. In either case, it is important for us to measure how sensitive our results are to the various assumptions that are made. Such an analysis allows interested parties to a) focus criticism, discussion, and further research on the issues that are most critical, and b) provides a measure of how confident policymakers should be concerning expectations of a proposed program.
For each of the programs analyzed in Table 1, we perform a set of policy analyses. In general, we measure the effect of changing the assumed discount rate, either because we think people are less patient or because of deteriorating program effects. We also measure the sensitivity of results to changes in assumed program effects not directly reported in the program evaluation. Finally, we measure the effect of changing the cost of the program.
In each case, we make one change in an assumption and hold everything else constant. While this allows us to measure the effect of each assumption by itself, it misses interaction effects. Most of the time, these interaction effects will be small. However, we saw above an example where relaxing two assumptions, the proportion of time one spends in jail after arrest and the propensity to commit crime after being released have significant interaction effects.
All of the sensitivity analyses we do concern assumptions that we made. However, the other, possibly large source of uncertainty about results is the randomness associated with the estimates of the program effects. For example, the standard error of effect of Service Learning on arrest probabilities is approximately 1/3 of the effect. Thus, a 90% confidence interval for the program effect for boys is 8% ± 2*2.33% = (3.67%, 12.67%), and a 90% confidence interval for the present value of this program change (excluding benefits to crime victims) is $32,864 ± 2 * $10955 = ($10,954, $54,774). While the effect of randomness of the reported program effects is obviously large, we did not perform sensitivity analyses to measure the sensitivity of results to them because of time constraints and because many of the analyses listed in Table 1 report pvalue ranges (e.g., p<0.01) rather than standard errors.
Reporting Results
For each program, we report the important program effects from the program analysis. Next, we report annual benefits associated with changing the behaviors affected by the program. We then translate them into longterm benefits using appropriate discounting multipliers and report net longterm benefits. In the summary report, we also report benefit/cost ratios.
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Card, D. (1999). “The Causal Effect of
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Economics, 3, pp. 18011863.
Dynarski, Mark, Mary Moore, John Mullens,
Philip Gleason, Susanne JamesBurdumy, Linda Rosenberg, Wendy Mansfield, Sheila
Heaviside, Daniel Levy, Carol Pistorino, Tim Silva, and John Deke (2003). “When
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(1999). “Evaluation of the Children at Risk Program: Results 1 Year After the
End of the Program.” National
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[1] It is worth noting that the JTPA analysis implied that the program reduced wage rates; this may also suffer from selection bias especially because one would have to wonder why participants would agree to join a training program with negative returns. Another way to say the same thing is that maximum likelihood estimates with a restriction that the value of participating must be positive would never result in an estimated negative return to the program. We kept JTPA in the analysis anyway because of the observed large effects on crime reduction.
[2] See Lynskey et al. (2003).
[3] This presents an extra problem, however, because another examined service learning program examined by Uggen and Janikula (1999) does directly estimate the effect of the program on criminal activity, and this has very large effects on the longterm benefit of the program. One should be hesitant to compare Teen Outreach and Service Learning without taking this difference in analysis into account.
[4] Though we know of the existence of such empirical analyses, we were not able to find them given time constraints.
[5] Based on
information in
[6] Card (1999) reports that wages for college graduates are higher than for high school graduates by 46%, and Hinton et al. (2008) find that the probability of finishing college conditional on starting college is 58.4%.
[7] We are still searching through our files to find the three missing citations on this page.
[8] One could reasonably argue that using marijuana in Hansen and Graham (1991) is really more like using gateway drugs in Harrell et al (1999) than longterm using drugs in Harrell et al (1999). However, since there is no other measure of drug use in Hansen and Graham (1991), we do not have much better alternatives.
[9] Define S = βx + β^{2}x + … + β^{T}x, implying that β S = β^{2}x + β^{3}x … + β^{T+1}x. Subtracting β S from S results in (1 β)S = 1  β^{T+1}x, implying that S = (1  β^{T+1}x) / (1 β).
[10] For example, for r = 0.1 implying β ≈ 0.9, the present value of receiving $1 a year for 40 years is (1β^{41}) /(1β) = $9.867, and the present value of receiving $1 a year forever is $10.
[11] Discounted life weighs earlier years more than later years.
[12] OAR is a local program to help offenders stay out of jail.
[13] This point was made to us convincingly by Karen Walker.