The Consequences of Implementing a Child Care Voucher: Evidence from Australia, The Netherlands and USA

In the Netherlands, the USA and Australia public funding has promoted parental choice by introducing a voucher for child care, where parents are free to choose the provider. The policy experiments in these three countries and the outcomes provide useful information about the consequences of introducing a voucher in the child care market. We show the voucher system can be effective in increasing demand, but there can be uneven supply responses. The structure of the voucher income scheme and quality controls affect the nature of the supply response. We argue that voucher schemes must take into account the complex nature of the child care market and the substitutability between free public care, private market care and unpaid household care. To secure quality and access, government must also play a coordinating role that vouchers alone can not supply.