Literacy simply means "to be literate"; "to be educated or cultured" (Merriam-Webster's Encyclopedia of Literature, 1995). Literacy is "having or showing extensive knowledge, experience or culture" (Webster's Unabridged Dictionary).
Deaf children develop literacy skills through their first language (American Sign Language) in the same way English-speaking children develop literacy skills.
Related posts: Literacy and Biliteracy in ASL and English
For further reading materials or information, check out some of these resources.
Michael Strong; Philip Prinz. "The Relationship between ASL Skill and English Literacy." March 1997. http://www.eric.ed.gov/PDFS/ED406785.pdf
"Results found that: ASL groups significantly outscored medium and low groups in English literacy."
Cheri L. Williams, and others. "The Language and Literacy Worlds of Profoundly Deaf Preschool Children: Informing Developmental Theory." April 1992. http://www.eric.ed.gov/PDFS/ED349715.pdf
"Findings challenge the belief that proficiency with spoken language is prerequisite to written language development. Spoken language and written language were seen as not only parallel forms of the same meaning-based language but also alternative forms. Findings suggest that there is no one pathway to become literate.
Harlane, Lane. et al. "Language and Literacy." Journey into Deaf World. Chapter 9, pp 266-292.
"The results were consistent: Deaf children of Deaf parents do significantly better academically than the Deaf children of hearing parents, including in reading and writing English..." (p 267)
"native speakers of ASL achieve much higher reading scores on the average than their Deaf peers who are not native speakers." (p 287)
Matthew W, et al. "Visual Skills and Cross-Modal Plasticity in Deaf Readers: Possible Implications for Acquiring Meaning from Print" (2015). https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2896825
Also see Literature in sign Language.Education of the Deaf children.
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