The Optimal Size of German Child Care Centers and the Impact of Regulation: Estimating the Cost Function of a Regulated Mulzi-Product Firm
AbstractUsing a unique data set on German child care centers, we estimate a long-run multi-product cost function for child care provision in Germanywhile 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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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 232 (2012)
Issue (Month): 5 (September)
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More information through EDIRC
Regulation; child care; multi-product cost function; economies of scope; Germany;
Find related papers by JEL classification:
- J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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