Working Paper: NBER ID: w18605
Authors: Daphna Bassok; Maria Fitzpatrick; Susanna Loeb
Abstract: The success of any governmental subsidy depends on whether it increases or crowds out existing consumption. Yet to date there has been little empirical evidence, particularly in the education sector, on whether government intervention crowds out private provision. Universal preschool policies introduced in Georgia and Oklahoma offer an opportunity to investigate the impact of government provision and government funding on provision of childcare. Using synthetic control group difference-in-difference and interrupted time series estimation frameworks, we examine the effects of universal preschool on childcare providers. In both states there is an increase in the amount of formal childcare. While there is no crowd-out in Oklahoma, some of the government subsidized preschool in Georgia replaces childcare that would have occurred otherwise. We find the largest positive effects on provision in the most rural areas, a finding that may help direct policymaking efforts aimed at expanding childcare.
Keywords: universal preschool; childcare; crowdout; government intervention
JEL Codes: I21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Universal preschool policies (H52) | Supply of formal childcare in Georgia (J13) |
| Universal preschool policies (H52) | Number of employees in childcare centers in Georgia (J89) |
| Universal preschool policies (H52) | Supply of formal childcare in Oklahoma (J13) |
| Government intervention (O25) | Overall childcare provision (J13) |
| Universal preschool policies in Georgia (H52) | Crowdout of private consumption (D12) |
| Competitive pressure from public preschool expansion in Oklahoma (I21) | Minimal displacement of private providers (L33) |