Investigating the consequences of public investments in Early Childhood Education and Care services for the quality of provision and child development

In most OECD countries, an increasing number of children aged 0-2 are spending a greater amount of their time in formal early childcare (ECC). ECC is generally recognized as an effective mean to expand skills that are important for the development of treated children as well as for income and educational opportunities. The scientific evidence on the subject is, however, inconclusive, because children with different characteristics and background of origin may benefit differently from ECC attendance. The goal of this project is to provide innovative causal evidence about the effect of different margins (in term of coverage, affordability and quality) of ECC attendance on the cognitive and non-cognitive development of the treated children. The project cares specifically about (but does not limit to) the group of children with a disadvantaged family background, for which we can interpret positive returns to ECC attendance as improving efficiency in human capital accumulation as well as equalizing educational and income opportunities.

Evaluating the causal effects of ECC expansion is a difficult exercise, insofar children are not randomly allocated into formal ECC facilities offering homogenous levels of care quality. Rather, parents select into care, depending for instance on the alternative means of care available at home, and chose the ECC facility quality level that better matches with their characteristics, (female) labor supply and income. In this project, we rely on the introduction of a generous ECC voucher in Luxembourg in 2009 to generate quasi-experimental variation in ECC assignment across the population of children born in the country about 2007-2012. For identification, we combine features of the reform (which improved affordability for low-income families and contextually raised equilibrium ECC supply) with a rich and innovative data infrastructure, gathering information from educational and fiscal register for the universe of the relevant population alongside survey data for a matched sample. We contribute to the literature along three lines. First, we exploit geographic variability in the expansion of ECC equilibrium supply to estimate (within a DiD setting) the effect of new slots created on development of treated children when in primary school. Second, we exploit discontinuities in the voucher scheme around several remuneration thresholds to estimate (within a RDD design) the effects of rising ECC affordability on children performances, along the distribution of family income. Third, we develop a structural equilibrium model (rationalizing the children to ECC provider empirical matches) that endogenizes parental sorting, in order to analyze whether returns on ECC attendance differ along the lines of quality of ECC centers and family characteristics.

In most OECD countries, an increasing number of children aged 0-2 are spending a greater amount of their time in formal early childcare (ECC). ECC is generally recognized as an effective mean to expand skills that are important for the development of children as well as for income and educational opportunities. The available scientific evidence on the subject is, however, inconclusive. This project will contribute with new causal evidence about the effect of public investments in ECC on the child development. We will combine highly reliable administrative data to detailed survey data from Luxembourg to produce high quality evidence on a policy relevant question.