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The impact of market forces on the provision of childcare: Insights from the 2005 Childcare Act in the Netherlands

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Author Info
Joëlle Noailly ()
Sabine Visser ()
Paul Grout

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Abstract

This paper examines the impact of the introduction of market forces on the provision of childcare in the Netherlands. In January 2005, the Dutch government introduced the Childcare Act which replaced the former financing system which had elements of both supply- and demand-financing with a fully demand-financing system. Whereas previously public funds partly flowed to suppliers in the form of subsidies granted by local municipalities, they now flow exclusively to parents who are free to choose their childcare provider. This reform was intended to stimulate market forces in the market for childcare. The change in the financing system may have also had an effect on the playing field between not-for-profit and for-profit childcare providers, as there are theoretical arguments for why municipalities might have given preferential treatment to not-for-profit providers when granting childcare subsidies. We compare the provision of childcare in the Netherlands under the old regime (in the period 1999- 2001) to the provision of childcare after the introduction of the Childcare Act (in 2006). We find that there has been a marked change in where childcare providers locate. Compared to the period 1999-2001, the provision of childcare in 2006 has shifted towards areas with higher purchasing power and away from less urbanised areas. In addition, we find that the share of forprofit providers expanded dramatically, while most of the contraction in childcare provision occurred in low-demand markets which were formerly solely occupied by not-for-profit centres. We discuss the policy implications of these results.

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File URL: http://www.cpb.nl/eng/pub/cpbreeksen/memorandum/176/memo176.pdf
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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Memoranda with number 176.

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Date of creation: Mar 2007
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Handle: RePEc:cpb:memodm:176

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Related research
Keywords: firm organisation; non-profit organisations and public enterprise; legal status; childcare;

Find related papers by JEL classification:
L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
L3 - Industrial Organization - - Nonprofit Organizations and Public Enterprise
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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  1. H. Naci Mocan & Erdal Tekin, 2000. "Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers," NBER Working Papers 7977, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. David M. Blau & H. Naci Mocan, 2002. "The Supply Of Quality In Child Care Centers," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 483-496, August. [Downloadable!] (restricted)
    Other versions:
  3. Pierre Koning & Joëlle Noailly & Sabine Visser, 2007. "Do non-profits make a difference?," CPB Documents 142, CPB Netherlands Bureau for Economic Policy Analysis. [Downloadable!]
  4. Paul A. Grout & Michelle J. Yong, 2003. "The Role of Donated Labour and Not for Profit at the Public/Private Interface," The Centre for Market and Public Organisation 03/074, Department of Economics, University of Bristol, UK. [Downloadable!]
  5. Eric Maskin & Jean Tirole, 2004. "The Politician and the Judge: Accountability in Government," American Economic Review, American Economic Association, vol. 94(4), pages 1034-1054, September. [Downloadable!]
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  6. Swati Mukerjee & Ann Dryden Witte & Sheila Hollowell, 1990. "Provision of Child Care: Cost Functions for Profit-Making and Not-for-Profit Day Care Centers," NBER Working Papers 3345, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Preston, Anne E, 1988. "The Effects of Property Rights on Labor Costs of Nonprofit Firms: An Application to the Day Care Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 36(3), pages 337-50, March. [Downloadable!] (restricted)
  8. Henry Hansmann & Daniel Kessler & Mark McClellan, 2002. "Ownership Form and Trapped Capital in the Hospital Industry," NBER Working Papers 8989, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Sujoy Chakravarty & Martin Gaynor & Steven Klepper & William B. Vogt, 2005. "Does the Profit Motive Make Jack Nimble? Ownership Form and the Evolution of the U.S. Hospital Industry," NBER Working Papers 11705, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Lakdawalla, Darius & Philipson, Tomas, 2006. "The nonprofit sector and industry performance," Journal of Public Economics, Elsevier, vol. 90(8-9), pages 1681-1698, September. [Downloadable!] (restricted)
  11. Jean Marie Abraham & Martin Gaynor & William B Vogt, 2003. "Entry and Competition in Local Hospital Markets," The Centre for Market and Public Organisation 03/088, Department of Economics, University of Bristol, UK. [Downloadable!]
    Other versions:
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