The Effect of Government Child Care Subsidy Programs on Child Care Choice among Low Income Families

Marcia K. Meyers, University of Washington
Se-Ook Jeong, University of Washington

The paper estimates the effects of state child care policies on low- income parents’ child care choices for their young children under age 6. Prior research suggests that these differences are largely explained by resource constraints; if the price of market care is reduced, lower income families would be expected to substitute market care for informal babysitting arrangements. Federal and state child care subsidies are designed to increase the purchasing power of low income families and would be expected to increase their use of market care. Policies for funding and regulating child care vary substantially across states; we make use of this variation to estimate the effects of alternative funding mechanisms and child care regulations on parents’ choice of formal (i.e. market-based) or informal (i.e. babysitting) child care arrangements for their youngest child.