Panel Paper:
Distributional Effects of Child Care Quality Ratings: Minnesota's Parent Aware
Thursday, November 7, 2019
Plaza Building: Concourse Level, Plaza Court 7 (Sheraton Denver Downtown)
*Names in bold indicate Presenter
Almost every state government intervenes in the market for child care services by providing quality ratings. This paper is about the effect of quality ratings on the low-income children who receive care assistance vouchers in Minnesota, with a particular focus on how the benefits from the ratings are distributed. Theory suggests two reasons why the impact of product quality ratings on consumers will be heterogeneous. First, consumers benefit from quality information only to the extent that the information has a marginal impact on the choices made. The effect of quality ratings thus depends on what choices are available. Second, increased demand from high-income consumers may adversely affect the availability of high quality care to low-income consumers through a pecuniary externality. Using administrative data from Minnesota’s Child Care Assistance Program I empirically investigate the effect of Minnesota’s Parent Aware provider quality ratings on the number of voucher-receiving children who use high quality providers, using se a model of demand based on a discrete choice framework. I estimate the treatment effect of the ratings separately from endogenous selection of the ratings by using a difference-in-differences style approach that relies on providers who switch ratings status during the data period. In order to minimize the effect of arbitrarily chosen market boundaries I treat all of Minnesota as a single market and include distance in the demand model, so that the extent of competition between particular providers depends in a realistic way on the geographic distribution of households and providers.
