Article

Unintended Consequences of Child Care Regulations

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Abstract

The effects of regulations governing staff-child ratio, group size, and staff qualifications in child care centers are estimated, using data on a sample of centers. The data contain measures of staff characteristics and wages, price of the service, and the developmental quality of the child care provided. Regulations vary across states, but may be endogenous to these outcomes. Estimates with state fixed effects are feasible because regulations vary within states by age group of children and job title of staff. Estimates with state fixed effects show that tougher regulations have some impact on input use, but have little or no impact on price and quality. The most striking finding is that tougher regulations reduce staff wages, suggesting that the incidence of child care regulations is on employees of day care centers.

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... Five of the 10 studies used data from the CQO study. These studies include the primary technical report from the CQO study , as well as four studies that conducted secondary data analysis of that data set (Blau & Mocan, 2002;Blau, 2007;Glantz & Layzer, 2000;. Two studies used data collected from military child care providers in multiple states (U.S. ...
... • Ages of children served. Nine studies considered how costs vary with the age of the children served by different providers (Blau & Mocan, 2002;Blau, 2007;, Levin & Schwartz, 2012Marshall et al., 2004a;U.S. GAO, 1999;. It is more costly to serve younger children than older children because regulatory standards require more caregivers to be present when serving younger children, resulting in higher personnel costs. ...
... • Licensing and regulations. Three studies noted that regulations may be linked to increased cost, as providers face higher standards to achieve accreditation and state licensing (Blau, 2007;Marshall et al., 2004;Pierson et al., 2014). For example, using CQO data, Blau (2007) examined the relationship between regulations and cost and concluded that regulations may not always increase the cost of providing care because centers can respond to increased regulations by engaging in substitution among inputs-that is, they compensate for the higher costs of some resources by spending less in other areas. ...
Technical Report
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This report reviews the literature and research syntheses in three areas—ECE quality, implementation science, and ECE costs—to create a conceptual framework that will guide measurement development. Key Findings: - Research reveals some associations between the features of an ECE center and quality, or children’s outcomes, but the lack of clear evidence means that ECE-ICHQ data collection must start broad. Factors at the center level that can affect implementation are important to measure. -Current measurement of the cost-to-quality relationship provides little direction for those who wish to invest in quality. -There is a need to align measures of implementation and cost to inform the direction of efforts to improve quality.
... This conclusion is consistent with the generally weak estimated effects of licensing regulations and the offsetting estimated effects of licensing regulations on class enrollment and training on the current job. Blau (2007) presents an empirical analysis which is closely related to the one presented here. Blau (2007) includes cross-sectional evidence regarding how the regulation of child care workers affects their training. ...
... Blau (2007) presents an empirical analysis which is closely related to the one presented here. Blau (2007) includes cross-sectional evidence regarding how the regulation of child care workers affects their training. He exploits variation across worker types (i.e. ...
... Additionally, he accounts for state fixed effects and occupation fixed effects. The empirical examination presented here differs from Blau (2007) in two important ways. First, I estimate a model with occupation-specific effects of licensing regulations on training. ...
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I estimate the effect of professional licensing policy on training. The li-censing regulations data come from a panel which contains rich variation in professional licensing policy for four diverse occupations. The individual-level data come from two supplements to the Current Population Survey. Licensing regulations seem to have little effect on vocational class enrollment. I find evi-dence that licensing requirements are positively related to whether respondents have acquired training since the current job began. I find scant evidence of a licensing wage premium. This suggests that the cumulative effect of licensing regulations on the supply of practitioners is small.
... An extensive literature examines how people and institutions respond to a regulatory framework, and it has generated considerable evidence demonstrating there are often unintended consequences of regulation. In some cases, these consequences are such that regulations become less effective than they otherwise might be or sometimes even be detrimental relative to some of their objectives (see, for example, DeLeire, 2000 ;Blau, 2007 ). This literature suggests that considerable care must be taken when designing and implementing regulatory regimes. ...
... As a further example, Blau (2007) examines trends to the inputs to child daycare centers as a function of regulations governing staff-child ratios, group sizes and staff qualifications. She finds no robust relationships between regulatory stringency and child care centers that suggests the regulations binded. ...
... Validating the mechanism 2: Summarized results of regression analyses for different time periods (dependent variable: whether a loan application is approved). A. All Tracts 20042004-20072008 LMI -0.009 * * * -0.009 * * * -0.012 * * * (20 pp. ≤ Δ%AMI) 0.009 * * * 0.009 * * * 0.011 * * * (10 ≤ Δ%AMI < 20 pp.) 0.006 * * * 0.006 * * * 0.006 * * * (-20 ≤ Δ%AMI < -10 pp.) -0.005 * * * -0.006 * * * -0.005 * * * ( Δ%AMI < -20 pp.) -0.007 * * * -0.007 * * * -0.008 * * * LMI × (20 pp. ...
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This research explores whether banks strategically leverage regulatory rules for the Community Reinvestment Act that fix a neighborhood's eligibility status over a decade based on a neighborhood's economic trajectory over that decade. Using 2004–2011 Home Mortgage Disclosure Act (HMDA) data, we find that banks approve loans more frequently in those neighborhoods that are most rapidly improving, and that this effect is stronger if the neighborhoods are CRA-eligible low- and moderate-income (LMI) tracts. We find the “moving up” CRA premium ranges in magnitude from a 2 to 13 percent reduction in the likelihood an application is not approved. These results suggest that banks learn which neighborhoods are most rapidly improving and funnel activity to those places to reduce default risk while complying with the fair lending regulation. The results imply a potential unanticipated consequence of the regulation is that it changes the distribution of resources within the target population.
... There is uncertainty about how many providers would fall under a new regulatory regime, and the impact of regulation on the cost and supply of FCC. Economic and policy research, drawing on the heavily market-driven US system, has demonstrated that stringent child-staff ratios and other regulations can affect supply and may also increase the price of child care (Blau 2003(Blau , 2006Hofferth and Chaplin 1998;Hotz and Xiao 2011;Rigby, Ryan, and Brooks-Gunn 2007). ...
... Child care is a service provided to arguably the most vulnerable population in society; the relative lack of focus on health and safety concerns is both concerning and puzzling. Despite evidence that demonstrates that parents are generally not well-informed consumers of child care (Blau 2006;Mocan 2007), the analysis reveals that argumentation about licensing during the legislative debate on child care modernization focused on choice and access -for both parents and providers -over health and safety and quality concerns. ...
... Economic research (e.g. Blau 2003, 460) cautions against binding and strictly enforced regulations that impose costs on providers which are likely to be passed on to consumers or back onto the providers in the form of lower wages (Blau 2006). But, as discussed above, that research does not generally consider the potential risks associated with the lack of regulation. ...
Article
In 2014, the Province of Ontario, Canada undertook a number of legislative changes regarding child care. Part way through the process, a series of tragic focusing events occurred: a number of infants and children died in unlicensed child care over a short period of time. Despite these events, the Province chose to allow a portion of the family child care (FCC) sector to remain unlicensed and essentially unregulated in a sector that is otherwise subject to strict licensing and regulation. Drawing on research on risk regulation, we analyse FCC regulation in comparison to other sectors and find that FCC is surprisingly under-regulated, given the health and safety risks. Legislative debate analysis reveals a number of rationales for non-regulation. In addition to pragmatic political concerns such as costs associated with licensing, analysis reveals concerns about choice and accessibility over quality and safety. We conclude with a call for a research agenda to further examine parents’ and policy-makers’ perceptions of risk.
... But, as noted in the literature on the effects of child care regulation (Blau 2003b;Blau and Currie 2006;Blau 2007;Hotz and Xiao 2011), this simple theory does not adequately characterize key features of the child care market. First, the quality of child care services is not directly regulated; rather, states tend to regulate the quality of "inputs" used in the production of these services, such as the educational qualifications of staff or the number of staff per child in a center. ...
... Blau finds mixed evidence on the effects of more stringent regulations on the quality of child care services available to parents (Blau 1997(Blau , 2000(Blau , 2007, with results being sensitive to the statistical methods used to control for other statelevel differences that may be correlated with state regulations. In contrast, Hotz and Xiao (2011), using panel data on child care providers and a more robust estimation strategy, find that more stringent regulations increase the fraction of centers that are of sufficient quality to be accredited by an external and independent accrediting agency, although these increases accrue disproportionately to higher-income markets. ...
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We analyze policies that support and affect the provision and costs of child care in the United States. These policies are motivated by at least three objectives: (1) improving the cognitive and social development of young children, (2) facilitating maternal employment, and (3) alleviating poverty. We summarize this policy landscape and the evidence on the effects they have on the development of children and parents. We provide a summary of the use and costs of nonparental child care services; and we summarize existing policies and programs that subsidize child care costs, provide child care to certain groups, and regulate various aspects of the services provided in the United States. We then review the evidence on the effects that child care policies have on these objectives. We go on to discuss the existing evidence of their effects on various outcomes. Finally, we outline three reform proposals that will both facilitate work by low-income mothers and improve the quality of child care that their children receive.
... Maternity leave that ends before a child is 6 months of age has been shown to result in the discontinuation of breastfeeding, which can often be traced to a mother's challenge to express milk while at work [59]. Mothers, especially younger mothers, who are able to stay home for 12 weeks or more, are more likely to continue breastfeeding and attend regular checkups with a physician [60]. ...
... Increasing child care licensing requirements can result in driving certain types of providers out of business-potentially diminishing the access to care for communities that may already face a high need. Implementing more rigorous healthy eating and physical activity best practices into licensing regulations could lead to other unintentional consequences [60] such as: increase the price for child care providers to stay in business; decrease the number of providers who apply for licenses, especially in high-need areas (rural) or age groups (infants); increase non-compliance with regulations; and increase the cost of care, an unattainable price for many already. Lastly, embedding obesity prevention techniques into regulations can only impact children and families that are in licensed child care-a setting that fails to incorporate many children and families because of barriers in cost, access, and cultural inadequacy. ...
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Purpose of Review This paper aims to highlight policy approaches for obesity prevention in early childhood while also discussing the opportunities for efforts to consider social determinants of health as a core tenet to child investments. Recent Findings Efforts to increase access to healthy food, active play, and reduced screen time have been seen through child care licensing regulations, Quality Rating Improvement Systems (QRIS), and federal funding streams; a recent case study of the Minnesota Statewide Health Improvement Partnership (SHIP) shows how the impact of these efforts can be augmented if they are community-driven and paired with proper support. Summary It is imperative to employ a health equity lens to policies for early obesity prevention—an approach that will benefit all children. National efforts have focused on improving health in the child care environment. This article discusses three main policy levers to impact obesity in early childhood, specifically through child care: main funding streams, Quality Rating Improvement Systems (QRIS), and child care licensing regulations. These efforts, coupled with a holistic view of health outside of the child care setting, will best support children’s physical and emotional well-being, promote whole-child development, and address fundamental social determinants of health. Lastly, the article discusses unintended consequences that can arise from some of these approaches.
... Many researchers Blau, 2007;Gorry & Thomas, 2017;Hotz & Xiao, 2011;Loeb et al., 2004;Scarr, 1998) argue that regulations unnecessarily increase the burden on operators and reduce access to ECEC services for low-income families in particular. Blau (2007) also finds that regulations negatively affect ECEC workers' wages, possibly contributing to lower program quality. ...
... Many researchers Blau, 2007;Gorry & Thomas, 2017;Hotz & Xiao, 2011;Loeb et al., 2004;Scarr, 1998) argue that regulations unnecessarily increase the burden on operators and reduce access to ECEC services for low-income families in particular. Blau (2007) also finds that regulations negatively affect ECEC workers' wages, possibly contributing to lower program quality. This view argues for reducing regulatory burden as a way of reducing costs to users (Gorry & Thomas, 2017) and promoting creativity in service delivery. ...
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In the Early Childhood Education and Care (ECEC) sector there is a move to reduce oversight costs by reducing the frequency of quality assessments in providers who score highly consistently across time. However, virtually nothing is known about the stability of ECEC quality assessments over time. Using a validated measure of overall classroom quality, we examined stability of quality in a sample of over 1000 classrooms in licensed child care centres in Toronto, Canada over a 3-year period. Multilevel mixed-effects linear regression analyses revealed substantial instability across all types of ECEC centres, although publicly operated centres were somewhat more stable and tended to have higher quality scores. We also found substantial variance between classrooms within ECEC centres. None of the structural, child/family and neighbourhood characteristics we examined were significantly related to stability of quality ratings. The lack of stability found in our sample does not support the use of a risk-based approach to quality oversight in ECEC. Large within centre classroom quality variance suggest that all classrooms within a centre should be assessed individually. Furthermore, classroom level scores should be posted when scores are made public as part of accountability systems. Future research should, in addition to administrative data used in our study, explore how factors such as educator training, participation in program planning, reflective practices and ongoing learning might improve stability of quality over time.
... This initiative dictated that, in return for federal monies, states must create preschool policy guidelines that align with their state's K -12 NCLB education standards (Scott-Little, Kagan, & Frelow, 2003; The White House, n.d.). These federally mandated preschool policy guidelines provide content standards intended to influence early educators' teaching practices and hold early educators -many of whom require no more than a high school diploma (Barnett, Hustedt, Friedman, Boyd, & Ainsworth, 2007; Blau, 2007; LeMoine, 2004) -accountable for educational outcomes. The current guidelines for each state are based on current early learning research, grounded in contemporary theory regarding best practice, and compiled by either a task force or steering committee whose membership is often comprised of early childhood experts from across the state. ...
... On quality, see: Peisner-Feinberg and Buchinal 1997. On teacher quality, see:Loeb et al. 2004; NICHD 2000;Arnett 1989;Fuller et al. 2006;Howes 1997;Blau 2003; Gormley and Philips 2007. On child-staff ratios, see: Clarke-Stewart and Allhusen 2005;Ruopp et al. 1979;Howes et al. 1998. ...
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This report calculates the full cost of providing well-planned, high quality pre-school for children in New Jersey, as required under Abbott vs. Burke (153 NJ 480 1998).
... This model is consistent with the observation that price and supply changes in one mode of child care will impact the demand for other child care arrangements, as suggested by Blau (1997Blau ( , 2003Blau ( , and 2006. The study found that regulations have more of an impact on center-based care and that the impact of regulation on family child care was not statistically significant. ...
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Most social scientists generally agree that early childhood is among the most important developmental stages for children (Heckman and Masterov, 2006; Grunewald and Rolnick, 2005; Shonkoff and Phillips, 2000, Anderson, 2006). The skills, habits, and attitudes developed in early childhood have the greatest and most long lasting effects
... This is because they frequently are not applied in practice or child care providers make other adjustments in response to the new standards, such as reducing staff salaries. 38 Research demonstrates an Quality: The Role of Staff-Child Regulations and Public Subsidies Group Size association between staff wages and the quality of child care classrooms. 39 In addition, improved staff-child standards tend to undermine the supply of care offered at a given price, or drive up the cost for a given level of supply (which can also result in reduced availability). ...
... However, due to insufficient data the study was unable to conclude whether this reallocation was harmful to consumers. Another study of childcare providers found that regulations that instituted quality requirements resulted in a reduction in staff wages that could have negative effects on the quality of the services provided [6]. ...
... Hence the quality of the service may actually end up not being affected by the regulations if the regulated issues are not directly important to the quality of care. For instance, Blau (2007) finds that there are no significant effects of tougher regulations on prices and quality using a cross-sectional sample of care centers. Similarly, Chipty and Witte (1997) find that service providers substitute space for labor by decreasing the staff-child ratio and also by increasing group sizes for children as a result of stricter regulations. ...
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Private and community-driven efforts can be an important resource to expand early childhood education and care (ECEC) services to poor children, under the right conditions and design. The regulations imposed on private ECEC provision, while having an impact on quality, may increase costs of provision and in return prices of services, reducing accessibility and affordability for poor households. This paper considers the impact of regulations on private ECEC in a highly regulated childcare market in a developing country. Using data from a recently fielded survey that sampled 141 private ECEC facilities in Istanbul, Turkey, the paper looks at the impact of fixed regulations on prices and poor children’s access to services, in particular the outdoor space requirement that was originally imposed on private providers in the 1960s and has over time become more difficult to fulfill in densely populated districts of the city. The paper estimates that controlling for other provider characteristics, in districts where such requirement is more binding, the price of childcare services increases by 376.2 TL per child per month and the percentage of children enrolled coming from poor backgrounds lowers by 15.1% points than in districts where such standard proves less challenging.
... State child care regulations are weak everywhere, but many centers exceed standards, even as others violate them. 9 With programs varying so greatly, widely varied effects on children are to be expected. ...
... Economic research characterizes the ECEC market as one of the asymmetric information (Blau 2007;Mocan 2007) where parents are the purchasers of services but their children are the recipients. For markets to regulate quality and ensure minimum health and safety, consumers of these services must have full information so that they can comprehensively weigh both cost and quality in choosing between care providers. ...
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Abstract This study examined early childhood education and care (ECEC) utilization in Canada, focusing on use of unlicensed home child care (HCC) from an equity perspective. Data from the 2011 cycle of the General Social Survey (GSS) were used. Across Canada, parent responses reveal that 16.6% of children between the age of 12 months and entry to school were in unlicensed HCC. Another 24% of working parents reported having no regular form of non-parental childcare. Families with higher incomes were more likely to report using center-based care. Conversely, lower-income working parents with lower levels of education were more likely to use unlicensed HCC or report using no non-parental care at all. Comparison of parent responses in Ontario, however, where government estimates for the number of licensed and unlicensed HCC spaces are available, revealed that more parents report that their children are in licensed HCC than is possible. The lack of accurate parental reporting calls into question a key assumption of current regulatory systems, which is that parents are informed consumers of ECEC services. Given that many parents misreport the type of HCC their children use, and the equity concerns raised by the overall utilization patterns we found, we argue that governments need to take a more active role in oversight and support of HCC.
... In contrast, formal education had no discernible impact on test scores. Recent research suggests that staff training affects quality, above and beyond the effects of formal education (Blau 2004). Little is known about the actual content of staff training that is likely to matter. ...
... Hence the quality of the service may actually end up not being affected by the regulations if the regulated issues are not directly important to quality of care. For instance, Blau (2007) finds that there are no significant effects of tougher regulations on prices and quality using a cross-sectional sample of care centers. Similarly, Chipty and Witte (1997) find that service providers substitute space for labor by decreasing staff-child ratio and also by increasing group sizes for children as a result of stricter regulations. ...
... This is because they frequently are not applied in practice or child care providers make other adjustments in response to the new standards, such as reducing staff salaries. 44 Research demonstrates an association between staff wages and the quality of child care classrooms. 45 In addition, improved staff-child standards tend to undermine the supply of care offered at a given price, or drive up the cost for a given level of supply (which can also result in reduced availability). ...
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Many developing countries have adopted the market approach for expanding the supply of child care, but little is known about the economic behavior of independent providers. Drawing on uniquely rich census data on child care providers from São Paulo, we document three main facts: (1) the stock of private suppliers is considerably larger in high-income city districts; (2) the quality of private provision – as measured by teachers' schooling, group size and equipment – is highly heterogeneous across space and increases systematically with local household income; and (3) a considerable share of centers operates below recommended (but not regulated) quality standards, especially in low-income districts. These findings are consistent with a model of endogenous entry and quality choices by heterogeneous providers. Market-driven heterogeneity in the quality of provision across space is an important consideration for the design of regulations in child care markets.
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Using a unique data set on German child care centers, we estimate a long-run multi-product cost function for child care provision in Germany while taking into account legal minimal labor input restrictions. For a representative child care center we find economies of scale, a U-shaped average cost curve, and indications of diseconomies of scope. The legally stipulated minimum child-to-staff ratio is manifested in a positive Lagrange multiplier, showing that modeling legal restrictions is necessary to avoid misspecification error. Our study provides a useful tool for policymakers in estimating the effects of future demographic change on child care costs.
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In this paper, we examine the effects of existing state-level child care regulations on the cost, or price, of non-parental child care, the demand for (non-parental) child care by parents, and the mother's decision to enter the labor force. We distinguish between the indirect effects of regulations on demand via their effect on the cost of such care facing parents as well and the direct (and non-price) effects regulations may have by imposing standards in the form of minimum levels of quality on available care facing parents. In our empirical analysis, we analyze the child care decisions of all parents with preschool age children, including households with working and non-working mothers, using child care data from the 1986 wave of the National Longitudinal Survey of the High School Class of 1972 (NLS72). We present estimates of the effects of two sets of regulations--namely, restrictions on child-to-staff ratios in day care centers and educational and/or training requirements of workers in either centers or home day care setting – as well as two types of child care subsidies – child care tax credit for working mothers and subsidies to providers – on the child care and maternal work decisions of households as well as on the hourly cost of child care. Our evidence indicates that state regulations both increase the cost of child care as well as have direct (non-price) effects on utilization but that their total effect tends to reduce the utilization of market-based child care, especially among households with non-working mothers. Since economically disadvantaged and black women are disproportionately represented in the latter group, it appears that one of the consequences of regulations are to defer the utilization of child care by households with children for whom the purported developmental benefits of organized day care might be most beneficial.
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In this cross-national study, the relations between structural and process quality in preschool classrooms are examined and compared across four countries—Germany (n = 82), Portugal (n = 80), Spain (n = 55), and the United States (n = 288). Process quality was assessed using the Early Childhood Environment Rating Scale and the Caregiver Interaction Scale. Structural quality variables include classroom, center, wage, and regional characteristics. A MANOVA found differences in levels of structural variables used in the different countries. Hierarchical regression, in which blocks of structural variables were entered according to their relative proximity to process quality, indicated that despite the diversity of the national systems, many of the same structural features have an impact on process quality. However, no one consistently powerful predictor of process quality was found, and there was no single block of variables with an overwhelming influence. The findings are viewed in terms of possibilities for improving process quality through manipulation of structural characteristics.
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Data from the Cost, Quality, and Outcomes Study (Helburn, 1995) are used to examine the effects of group size, staff-child ratio, and teacher qualifications on the quality of child care provided in day care centers. The Cost, Quality, and Outcomes data are from a representative 4-state sample of day care centers with a design that makes it possible to control for unobserved differences across centers that could cause biased estimates of the effects of interest. The empirical results indicate that group size has small and statistically insignificant effects on child-care quality. A higher staff-child ratio appears to have beneficial effects on child-care quality when unobserved differences across centers are not accounted for. These effects become much smaller when unobserved differences are accounted for. The effects of teacher education and training are also generally not robust, but some measures of education and training have quantitatively and statistically significant effects even accounting for unobserved differences across centers. The implications of the results for future research on the determinants of child-care quality and for public policy are discussed.
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This study quantified the benefits to children and parents participating in nine early intervention programs and conducted a cost-benefit analysis of the Perry Preschool and the Elmira Prenatal/Early Infancy Project (PEIP). The findings indicated that early intervention programs led to the following advantages for program participants relative to those in the control groups: (1) gains in child emotional or cognitive development or improved parent-child relationships; (2) improvements in educational process and child outcomes; (3) increased economic self-sufficiency, initially for parents and later for children; (4) reduced criminal activity; and (5) improvements in health-related indicators. Savings to government programs were much higher than the costs for the Perry Preschool; this was also true for the higher-risk families of the PEIP. For lower-risk participants of the PEIP, however, government savings were not enough to offset program costs. (Two appendices detail the benefit cost analysis. Contains 159 references.) (KB)
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Advocates for the poor frequently support uniform, high federal standards for subsidized social services. While such standards may improve the quality of services for those who qualify, they can also have unintended but important side effects. Stringent regulations may actually curtail the supply of services, promote segregation, and expand the role of large subsidized for-profit firms. All these possibilities are illustrated by the history of federal regulation in subsidizing child day care. The federal government's retreat from regulation in 1980 and 1981 may have had results that-even if unintended-were in many ways salutary.
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Most state regulations do not adversely affect the availability of regulated day-care services. However, regulations differ in their costliness, intrusiveness, and enforceability. Costly regulations may reduce the number of group day-care centers, and intrusive regulations may reduce the number of family day-care homes. Unenforceable regulations have no apparent effects. In some instances, regulators face trade-offs between quality and availability. However, requirements for provider training and limitations on group size do not involve such trade-offs. More broadly, improvements in the regulatory process may result in quality gains without reductions in availability.
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This paper examines evidence on the effect of class size on student achievement. First, it is shown that results of quantitative summaries of the literature, such as Hanushek (1997), depend critically on whether studies are accorded equal weight. When studies are given equal weight, resources are systematically related to student achievement. When weights are in proportion to their number of estimates, resources and achievements are not systematically related. Second, a cost-benefit analysis of class size reduction is performed. Results of the Tennessee STAR class-size experiment suggest that the internal rate of return from reducing class size from 22 to 15 students is around 6%.
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The effect of child care regulations on outcomes in the child care market and the labor market for mothers of young children is examined. The analysis uses a time series of cross sections and examines the robustness of previous cross-section findings to controls for state-level heterogeneity. Child care regulations as a group have statistically significant effects on most outcomes, with or without state fixed effects. However, regulations do not vary enough within state over time to allow precise identification of most individual regulation effects. The great majority of estimated regulation effects in all specifications are small and insignificantly different from 0. Some of the estimated effects seem reasonable in sign and magnitude, but others are clearly implausible. © 2003 by the Association for Public Policy Analysis and Management.
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When explanatory variable data in a regression model are drawn from a population with grouped structure, the regression errors are often correlated within groups. Error component and random coefficient regression models are considered as models of the intraclass correlation. This paper analyzes several empirical examples to investigate the applicability of random effects models and the consequences of inappropriately using ordinary least squares (OLS) estimation in the presence of random group effects. The principal findings are that the assumption of independent errors is usually incorrect and the unadjusted OLS standard errors often have a substantial downward bias, suggesting a considerable danger of spurious regression.
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The child care related values and quality assessments of parents as child care consumers were examined. Seven hundred and twenty-seven parents of infants/ toddlers and 2,407 parents of preschoolers responded to questionnaires, providing both importance and quality ratings for aspects of child care. Quality ratings for these same aspects of care were completed by trained data collectors. Parents gave high importance scores for all aspects of care, with higher scores for interactions, health and safety related items than for other aspects of care. Parents gave their children's quality of care significantly higher ratings than did observers. When parents and observers rated the quality of aspects of care that were easy to monitor, differences in parent/observer quality scores were smaller than when they rated aspects that were more difficult to monitor. As parental values increased for an aspect of care, the difference between parent and observer quality scores also increased.
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This paper reports estimates of models of the determinants of quality in day care centers. The analysis examines the sensitivity of the results to specification issues that have not been investigated previously. In the best-fitting models that survive an extensive set of specification tests, group size and child-staff ratio have small impacts on the quality of care provided. The effects of staff education and training are typically small as well. The results raise questions about the knowledge base on which to make policy recommendations concerning the benefits of regulations and subsidies intended to improve the quality of child care.
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We use data from a sample of child care centers to estimate the relationships between cost and child care quality, and between revenue and quality. We use a measure of child care quality, designed by developmental psychologists, that is positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we estimate the objective functions of firms and compute the quality supply function. The results indicate that the supply of quality is moderately elastic with respect to price and the wages of child care center workers. Implications of the results for child care policy are discussed. © 2001 by the President and Fellows of Harvard College and the Massachusetts Institute of Technolog
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Professional licensure benefits producers by creating entry barriers into the profession, but consumers might also gain if licensure induces producers to supply high levels of quality. Whether consumers or producers gain most form licensure can be determined by examining the effect of licensure requirements on aggregate consumption. This paper uses a cross-sectional model to estimate the relationship between variations in state licensure rules and consumption of child care services. The results suggest that professional interests, and not those of consumers, are dominant in the setting of regulatory standards for the US child care industry.
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I investigate the consequences of imposing a minimum quality standard on an industry in which firms face quality-dependent fixes costs and compete in quality and price. Even though the high-quality sellers would satisfy the standard in the absence of regulation, imposing a standard leads these sellers to raise qualities. They do so in an effort to alleviate the price competition, which intensifies as a result of the low-quality sellers' having raised their qualities to meet the imposed standard. However, by its very nature, a minimum quality standard limits the range in which producers can differentiate qualities. Hence, in the end, price competition intensifies, and prices -- "corrected for quality change" -- fall. Due to the better qualities and lower hedonic prices, and compared to the unregulated equilibrium, all consumers are better off, more consumers participate in the market, and all participating consumers -- including those who would consume qualities in excess of the standard in the absence of regulation -- select higher qualities. When the consumption of high-quality products generates positive externalities -- as in the case of safety products -- these results favor minimum quality standards. I also show that even in the absence of externalities an appropriately chosen standard improves social welfare.
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It is disappointing that numerous studies have not produced more consistent evidence of the long-term effectiveness (or lack of effectiveness) of early intervention. However, all studies are not created equal, and better studies tend to find larger and more significant long-term effects. Moreover, we show below that the proven short- and medium-term benefits of Head Start already pay back much of the cost of the program. The existing literature also provides some guidelines for the design of early intervention programs. Specifically, it suggests that while it may be useful to intervene before 3 years old, interventions for preschool and school age children can also be effective. Second, the effects of early intervention are generally larger for more disadvantaged children, which provides a rationale for targeting such programs to these children. Third, the most important aspect of child care quality is the nature of the interaction between the teacher and the child. Small group sizes, better teacher training, and other regulable aspects of quality all make positive interactions more likely. Moreover, even rather loose federal oversight of these observable aspects of quality can be effective in eliminating poor-quality programs.
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Accidents are the leading cause of death and injury among children in the United States, far surpassing diseases as a health threat. We examine the effects of child care regulation on rates of accidental injury using both micro data from the National Longitudinal Survey of Youth, and Vital Statistics mortality records. Estimates from both data sources suggest that requiring day care center directors to have more education reduces the incidence of unintentional injuries. An auxiliary analysis of the choice of child care mode confirms that these regulations are binding and that higher educational requirements tend to crowd some children out of care, as do regulations requiring frequent inspections of child care facilities and lower pupil-teacher ratios. Thus, regulation creates winners and losers: Some children benefit from safer environments, while those who are squeezed out of the regulated sector are placed at higher risk of injury.
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This paper applies direct tests for adverse selection and moral hazard in the market for child care. A unique data set containing quality measures of various characteristics of child care provided by 746 rooms in 400 centers, as well as the evaluation of the same attributes by 3,490 affiliated consumers (parents) is employed. Comparisons of consumer evaluations of quality to actual quality show that, after adjusting for scale effects, parents are weakly rational. The hypothesis of strong rationality is rejected, indicating that parents do not utilize all available information in forming their assessment of quality. Parent characteristics impact the accuracy of their evaluations. An analysis of easy-to-observe versus difficult-to-observe aspects of quality reveals that parents are trying to extract signals more heavily in cases of difficult-to-observe items. A comparison of parent assessments to results obtained from standard quality production functions reveals that, for the most part, parents interpret the signals incorrectly. The results demonstrate the existence of information asymmetry and adverse selection in the market. There is some limited evidence for moral hazard as nonprofit centers with very clean reception areas tend to produce lower level of quality for unobservable items. These results provide an explanation for low average quality in the child care market.
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This paper discusses early childhood education programs: their goals; effectiveness; optimal timing, targeting, and content; and costs and benefits. Early intervention has significant short- and medium-term benefits: most notably it reduces grade repetition and special education costs, and provides quality child care. The effects are greatest for more disadvantaged children. Some model programs have produced exciting improvements in educational attainment and earnings and have reduced welfare dependency and crime. The jury is still out on the long-term effects of Head Start, but Head Start would pay for itself if it produced a quarter of the long-term gains of model programs.
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The study of the regulation of occupations has a long and distinguished tradition in economics. In this paper, I present the central arguments and unresolved issues involving the costs and benefits of occupational licensing. The main benefits that are suggested for occupational licensing involve improving quality for those persons receiving the service. In contrast, the costs attributed to this labor market institution are that it restricts the supply of labor to the occupation and thereby drives up the price of labor as well as of services rendered. Alternative public policies for this institution are identified.
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There are numerous empirical studies that exploit variation in policies over space and time in the U.S. federal system. If state policy making is purposeful action responsive to economic and political conditions within the state then it is necessary to identify and control for the forces that lead to these policy changes. This paper investigates the implications of policy endogeneity for a specific policy context--workers' compensation benefits. We contrast different methods of estimation and their pros and cons in this context.
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I analyse occupational licensing as an input regulation that requires minimum levels of human capital investment by professionals. By raising professionals' training levels, licensing helps alleviate moral hazard problems associated with the provision of high quality services. I also consider certification, whereby consumers are provided information about professionals' training levels. I show that licensing and certification tend to benefit consumers who value quality highly at the expense of those who do not. Licensing may raise total surplus if sellers' investments are not observable, but is Pareto-worsening if training levels are observable. Certification may, however, lead to excessive investment as a signalling device, and thus be Pareto Inferior to either licensing or to a policy of laissez-faire.
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