Every state in the U.S. regulates some dimension of the child care market. Advocates of these regulations typically justify government intervention in child care on the grounds that the regulations enhance child outcomes. While there is limited evidence that some of the characteristics of care that tend to be regulated are correlated with better child outcomes, no research has established a link between the regulations and child outcomes. The goal of this application is to determine whether child care regulations provide the improvement in child outcomes that is the foundation of the justification for regulations. In the proposed study, two primary analytic tasks are planned. First, they will estimate preschool care mode choice simultaneously with care price, hours of care and mother's labor force participation. This model allows regulations to enter both the mode demand and price equations and utilizes variation in state-level child care regulations to identify the effects of the regulations. The estimation strategy takes into account the interrelatedness of the decisions in the model and the selectivity of the women observed working and paying for care in different modes. Second, the investigators will estimate child outcome production functions controlling for the selectivity of families choosing particular care modes using results from the first stage. Data from the National Longitudinal Survey of Youth Child Data (NLSY-C) will be used. This survey includes information on child care mode choice, price and attributes, as well as child and family characteristics that are used in the first task. The NLSY-C includes a child assessment module that reports measures of children's cognitive, socioemotional and physical development that are used in the second task.
