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Quality Adjusted Cost Functions for Child Care Centers

  • H. Naci Mocan

Using a newly compiled data set, this paper estimates multi- product translog cost functions for 399 child care centers from California, Colorado, Connecticut, and North Carolina. Quality of child care is controlled by a quality index, which has been shown to be positively related to child outcomes by previous research. Nonprofit centers that receive public money, either from the state or federal government, (which is tied to higher standards), have total variable costs that are 18 percent higher than other centers, keeping quality of services constant. No statistically significant differences between general categories of for-profit and non-profit centers are detected. Furthermore, various types of nonprofits are not distinguishable from their for-profit counterparts. In agreement with previous studies, the data show that the average quality of center-based child care is between 'minimal' and 'good', and it costs 13 cents per hour per child to increase this average quality to the level considered developmentally appropriate by child care experts.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5040.

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Date of creation: Feb 1995
Date of revision:
Publication status: published as American Economic Review, vol. 82, no. 2, pp. 409-412 (May 1995).
Handle: RePEc:nbr:nberwo:5040
Note: HE LS
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. Irene Powell & James Cosgrove, 1992. "Quality and Cost in Early Childhood Education," Journal of Human Resources, University of Wisconsin Press, vol. 27(3), pages 472-484.
  2. Kennedy, Peter E, 1981. "Estimation with Correctly Interpreted Dummy Variables in Semilogarithmic Equations [The Interpretation of Dummy Variables in Semilogarithmic Equations]," American Economic Review, American Economic Association, vol. 71(4), pages 801, September.
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