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The Impact of Regulations on the Supply and Quality of Care in Child Care Markets

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  • V. Joseph Hotz
  • Mo Xiao

Abstract

We examine the impact of state child care regulations on the supply and quality of care in child care markets. We exploit panel data on both individual establishments and local markets to control for state, time, and, where possible, establishment-specific fixed effects to mitigate the potential bias due to policy endogeneity. We find that the imposition of regulations reduces the number of center-based child care establishments, especially in lower income markets. However, such regulations increase the quality of services provided, especially in higher income areas. Thus, there are winners and losers from the regulation of child care services. (JEL H75, J13, L51, L84)

Suggested Citation

  • V. Joseph Hotz & Mo Xiao, 2011. "The Impact of Regulations on the Supply and Quality of Care in Child Care Markets," American Economic Review, American Economic Association, vol. 101(5), pages 1775-1805, August.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:5:p:1775-1805
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    JEL classification:

    • L5 - Industrial Organization - - Regulation and Industrial Policy
    • L8 - Industrial Organization - - Industry Studies: Services

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