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Price and quality in the UK childcare market

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  • Alan Duncan

    ()
    (Institute for Fiscal Studies and NATSEM, University of Canberra)

  • Gillian Paull

    ()
    (Institute for Fiscal Studies)

  • Jayne Taylor

    (Institute for Fiscal Studies)

Abstract

Childcare subsidies are typically advocated as a means to making paid employment profitable for mothers, but also have important ramifications for the use and quality of paid childcare. Even if one is concerned primarily with the quantity aspect, the quality dimension cannot be ignored. This paper provides an exposition of the potential biases in estimates of price elasticities with respect to quantity that do not allow for quality variation or for the possibility of non-linear pricing structures. Using an approach developed in the demand estimation literature, a price measure addressing these issues is derived and the importance of using this measure is tested using British data. Price is found to have a negative impact on the use of formal paid care, the hours purchased and the quality chosen. However, failure to control for quality effects and non-linearities in the price measure is shown to generate significant overestimates of the price elasticities.

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Bibliographic Info

Paper provided by Institute for Fiscal Studies in its series IFS Working Papers with number W01/14.

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Length: 55 pp
Date of creation: May 2001
Date of revision:
Handle: RePEc:ifs:ifsewp:01/14

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Cited by:
  1. Denise Doiron & Guyonne Kalb, 2005. "Demands for Child Care and Household Labour Supply in Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 215-236, 09.
  2. Del Boca, Daniela & Locatelli, Marilena & Vuri, Daniela, 2004. "Child Care Choices by Italian Households," IZA Discussion Papers 983, Institute for the Study of Labor (IZA).
  3. Guyonne Kalb, 2009. "Children, Labour Supply and Child Care: Challenges for Empirical Analysis," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 42(3), pages 276-299.
  4. Parera-Nicolau, Antonia & Mumford, Karen A., 2005. "Labour Supply and Childcare for British Mothers in Two-Parent Families: A Structural Approach," IZA Discussion Papers 1908, Institute for the Study of Labor (IZA).
  5. Brink, Anna & Nordblom, Katarina, 2005. "Child-care quality and fee structure: Effects on labor supply and leisure composition," Working Papers in Economics 157, University of Gothenburg, Department of Economics.

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