Paper on German child care (Kindergarten)

Who benefits from universal child care? Estimating marginal returns to early child care attendance

Thomas Cornelissen Christian
Dustmann Anna Raute
Uta Schönberg

Abstract

In this paper, we examine the heterogeneous treatment effects of a universal child care (preschool) program in Germany by exploiting the exogenous variation in attendance caused by a reform that led to a large staggered expansion across municipalities. Drawing on novel administrative data from the full population of compulsory school entry examinations, we find that children with lower (observed and unobserved) gains are more likely to select into child care than children with higher gains. This pattern of reverse selection on gains is driven by unobserved family background characteristics: children from disadvantaged backgrounds are less likely to attend child care than children from advantaged backgrounds but have larger treatment effects because of their worse outcome when not enrolled in child care.

Conclusions

In this paper, we assess the heterogeneity in the effects of universal child care on child development at the age of school entry by estimating marginal returns to early child care attendance. Building on a tighter identification strategy than adopted in the related MTE literature, and using novel administrative data on child outcomes in a context in which all children undergo standardized and mandatory school entry examinations, we document substantial heterogeneity in the returns to early child care attendance with respect to both observed and unobserved child characteristics. For our main outcome of school readiness, we find that when attending child care late, minority children are 12 percentage points less likely to be ready for school than majority children. Attending child care early, however, nearly eliminates the differences between minority and majority children. Yet despite these larger returns from treatment, minority children are substantially less likely than majority children to enter child care early, pointing to a pattern of reverse selection on gains based on these observed child characteristics. We document a similar pattern for unobserved child characteristics: children with unobserved characteristics that make them least likely to enter child care early benefit the most from early child care attendance. We also provide evidence that these children may be disproportionally drawn from disadvantaged family backgrounds. Overall, our results show not only that heterogeneity in children’s responses to early child care attendance and parental resistance to child enrollment are key when evaluating universal child care programs but also that parents’ choices on behalf of their children may differ from those that the children themselves would make. They further suggest that the universal child care program which we study disproportionally subsidizes advantaged families whose children have the least to gain from early child care attendance. At the same time, it does not sufficiently reach minority and disadvantaged families whose children would benefit the most from the program. These observations raise the question of what type of policies could be implemented to draw these hard-to-reach children into early child care? One important first step (recently enacted by some German states) may be to make child care free for disadvantaged families while eliminating, or at least reducing, subsidies to advantaged families, thereby possibly improving child outcomes without increasing public spending. Such a policy, however, does not address the informational deficits and the cultural or religious concerns that may make disadvantaged and minority families resistant to enrollment in public child care and prevent them from fully appreciating its advantages. Hence, policies that inform disadvantaged families about the benefits of early child care ought to take account of cultural heterogeneity. They should carefully address culturally or religiously motivated concerns of parents while actively supporting their children’s enrollment in programs to improve the take-up rate of hard-to-reach children.