Price, Quality, and Income in Child Care Choice

Abstract

Recent legislation may substantially expand federal assistance in paying for child care. This paper examines the potential effects of three aspects of federal assistance-reducing child care price (through vouchers or grants to providers), improving its quality (through incentives or regulation), and increasing family income (through tax credits)-on the child care choices employed mothers make. The data come from the 1985 wave of the National Longitudinal Survey of Youth, Ohio State University. Both multinomial and universal logit models are used. The results suggest that price is a critical variable in child care choice. The higher the price, the lower the probability a mode of care will be chosen. Parents do not consistently select high quality care, although overall quality improvements may increase the use of family day care. Mothers who earn more per hour and families who have higher incomes (other than the mother's earnings) are more likely to select center care over other modes. Consequently, subsidizing child care expenditures directly through vouchers and reduced fees or increasing other family income through tax credits consistently increases the use of center-based programs, all else equal.