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How small are small markets? Local market size for child care services

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  • Pennerstorfer, Astrid
  • Pennerstorfer, Dieter

Abstract

In this article, we propose an innovative way of delineating local markets based on easily accessible data. We apply this concept to the day care industry and investigate providers' location choices relative to local market characteristics to evaluate the widespread presumption that local markets for child care services are geographically very small. Using a panel of all day care centers for the metropolitan region of Vienna, Austria, for nearly a decade, as well as geographically extremely disaggregated data on the spatial distribution of children under the age of six at the 250 m × 250 m grid cell level, we find that the location of children and day care centers are strongly related, but this relationship diminishes as soon as the distance between a child's place of residence and the day care center's location increases. We conclude that local markets for day care services in metropolitan regions are indeed very small (about 500 m or 550 yards).

Suggested Citation

  • Pennerstorfer, Astrid & Pennerstorfer, Dieter, 2019. "How small are small markets? Local market size for child care services," Regional Science and Urban Economics, Elsevier, vol. 77(C), pages 340-355.
    • Handle: RePEc:eee:regeco:v:77:y:2019:i:c:p:340-355
    DOI: 10.1016/j.regsciurbeco.2019.06.006
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    4. Dieter Pennerstorfer & Nora Schindler & Christoph Weiss & Biliana Yontcheva, 2020. "Income Inequality and Product Variety: Empirical Evidence," Economics working papers 2020-17, Department of Economics, Johannes Kepler University Linz, Austria.

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    More about this item

    Keywords

    Spatial market definition; Location choice; Market entry; Child care; Grid data;
    All these keywords.

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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