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The nonprofit advantage: Producing quality in thick and thin child care markets

Author

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  • Gordon Cleveland

    (Associate Chair and Senior Lecturer in Economics, Department of Management, University of Toronto, Scarborough)

  • Michael Krashinsky

    (Chair and Professor of Economics, Department of Management, University of Toronto, Scarborough, and Center for Industrial Relations and Human Resources, University of Toronto)

Abstract

Nonprofit child care centers are frequently observed to produce child care which is, on average, of higher quality than care provided in commercial child care centers. In part, this nonprofit advantage is due to different input choices made by nonprofit centers-lower child-staff ratios, better-educated staff and directors, higher rates of professional development for staff. Nonprofit centers may have an additional productivity advantage, due to unmeasured staff motivation and abilities or to better management of the production of good-quality child care. However, where nonprofit and for-profit child care firms compete in the same local markets, we speculate that this extra advantage should only appear where demand is sufficiently “thick” to permit a quality differentiation strategy to be financially viable for nonprofits. We estimate the effect of nonprofit status on quality, controlling for differences in financial resources available to the center, differences in the clientele served, and differences in staff and center inputs. In this conventional examination, nonprofit status has a moderately positive impact on quality. However, when we account for the unobserved heterogeneity and separate markets into “thick” and “thin,” a particularly strong nonprofit advantage is found in thick markets, but no productivity advantage for nonprofits is found in thin markets. This finding suggests a clear role for nonprofit organizations in improving the cost-quality trade-off faced by parents, but also identifies the market conditions that affect the ability of nonprofit managers to employ this advantage. © 2009 by the Association for Public Policy Analysis and Management.

Suggested Citation

  • Gordon Cleveland & Michael Krashinsky, 2009. "The nonprofit advantage: Producing quality in thick and thin child care markets," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 28(3), pages 440-462.
  • Handle: RePEc:wly:jpamgt:v:28:y:2009:i:3:p:440-462
    DOI: 10.1002/pam.20440
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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. Muehler, Grit, 2008. "Institutional Childcare: An Overview on the German Market," ZEW Discussion Papers 08-077, ZEW - Leibniz Centre for European Economic Research.
    3. Astrid Pennerstorfer & Dieter Pennerstorfer, 2018. "How Small are Small Markets? Location Choice and Geographical Market Size for Child Care Services," Economics working papers 2018-14, Department of Economics, Johannes Kepler University Linz, Austria.
    4. Juan José Barrios, 2011. "Participation in voluntary organizations," Documentos de Investigación 70, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    5. Juan José Barrios, 2011. "Existence of non-profit organizations in the United States of America," Documentos de Investigación 68, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.
    6. Susan Prentice, 2006. "Childcare, co-production and the third sector in Canada," Public Management Review, Taylor & Francis Journals, vol. 8(4), pages 521-536, December.
    7. Astrid Pennerstorfer & Dieter Pennerstorfer, 2019. "Inequalities in spatial accessibility of childcare: The role of non-profit providers," Economics working papers 2019-15, Department of Economics, Johannes Kepler University Linz, Austria.
    8. Owens, Mark F. & Rennhoff, Adam D., 2014. "Provision and price of child care services: For-profits and nonprofits," Journal of Urban Economics, Elsevier, vol. 84(C), pages 40-51.
    9. Thorpe, Karen & Potia, Azhar Hussain & Searle, Bonnie & Van Halen, Olivia & Lakeman, Nicole & Oakes, Candice & Harris, Holly & Staton, Sally, 2022. "Meal provision in early childhood education and care programs: Association with geographic disadvantage, social disadvantage, cost, and market competition in an Australian population," Social Science & Medicine, Elsevier, vol. 312(C).
    10. Adam D. Rennhoff & Mark F. Owens, 2012. "Competition and the Strategic Choices of Churches," American Economic Journal: Microeconomics, American Economic Association, vol. 4(3), pages 152-170, August.
    11. Y.E. Akgündüz & E. Jongen & P.P.M. Leseman & J. Plantenga, 2013. "Cutting from the future? Impact of a subsidy reduction on child care quality in the Netherlands," Working Papers 13-18, Utrecht School of Economics.
    12. Y.E. Akgündüz & J. Plantenga, 2013. "Competition for a better future? Effects of competition on child care quality," Working Papers 13-14, Utrecht School of Economics.
    13. Pierre Koning & Joëlle Noailly & Sabine Visser, 2007. "Do Not-For-Profits Make a Difference in Social Services? A Survey Study," De Economist, Springer, vol. 155(3), pages 251-270, September.
    14. Carolyn J. Cordery & Dalice Sim & Tony Zijl & Gary Monroe, 2017. "Differentiated regulation: the case of charities," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 57(1), pages 131-164, March.
    15. Giapponi Schneider, Kate & Erickson Warfield, Marji & Joshi, Pamela & Ha, Yoonsook & Hodgkin, Dominic, 2017. "Insights into the black box of child care supply: Predictors of provider participation in the Massachusetts child care subsidy system," Children and Youth Services Review, Elsevier, vol. 79(C), pages 148-159.
    16. Lam, Marcus & Klein, Sacha & Freisthler, Bridget & Weiss, Robert E., 2013. "Child center closures: Does nonprofit status provide a comparative advantage?," Children and Youth Services Review, Elsevier, vol. 35(3), pages 525-534.

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