Free daycare policies, family choices and child development

Over recent decades, many governments have expanded state-subsidized daycare for preschool children. Using the staggered introduction of free universal daycare for children between the ages of two and six, we show that free daycare increases attendance only among 2-3-year-old children. There is no effect for older children for which attendance rates have been high even before the reforms. Similarly, labor market attachment increases for mothers with 2-3-year-olds, while mothers of 4-6-year-olds respond mostly at the intensive margin. Short-run development for the average child is largely unaffected by the reforms. Responses and short-run benefits are much more pronounced for poorer and low-skilled families than for the average household. Hence, despite being a universal program, free daycare helps to level the playing field for children from disadvantaged backgrounds – provided the policy is focused on age ranges with low prior attendance.