The Impact of Universal Preschool on the Childcare Sector

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New publicly funded child care centers tended to increase the total number of childcare providers.

Government programs for early childhood education have expanded in recent decades. Two states illustrate this trend. Georgia expanded its preschool program to all age-eligible residents in 1995, enabling money from the state government to follow children to the government-certified provider of their parents' choice. Oklahoma adopted universal preschool in 1998, offering it through the state's existing public school system. As one would expect, these different subsidy methods led to substantial differences in the market for childcare.

In Does State Preschool Crowd-out Private Provision? The Impact of Universal Preschool on the Childcare Sector in Oklahoma and Georgia (NBER Working Paper No. 18605), Daphna Bassok, Susanna Loeb, and Maria Fitzpatrick analyze the effect of these expansions in universal preschool for 4-year-olds in Georgia and Oklahoma, both on the total amount of formal childcare provided and on the outcomes for public-versus-private childcare providers.

They find that in both states, new publicly funded childcare centers tended to increase the total number of childcare providers, indicating that government intervention can increase preschool use. In Georgia, where universal preschool mandated 6.5 hours of daycare and cost $4,298 per child in 2010-11, the childcare sector expanded by 25 percent. Georgia's Pre-Kindergarten program allowed students to enroll in either public or private preschools, and the observed expansion of childcare occurred in both the public and private sectors. The majority of the participants in the publicly funded preschool program enrolled in public or private centers that were in operation before the new mandate took effect.

In Oklahoma, where about 90 percent of the universal preschool slots are provided through the public school system, both half (2.5 hour) and full (6 hour) days are allowed. Average spending in 2010-11 was $3,461. The number of formal childcare providers increased by 30 percent after the program took effect, although almost all of that increase (90 percent) took place in the public sector.

The authors find that government subsidized programs increased the availability of childcare in rural areas even more than in other parts of Georgia and Oklahoma. This finding suggests that efforts to expand preschool use may be most productive when targeted at areas with initially lower levels of supply.

--Linda Gorman