The Supply of Quality in Child Care Centers

51 Pages Posted: 11 Jun 2000 Last revised: 7 Oct 2021

See all articles by David M. Blau

David M. Blau

University of North Carolina (UNC) at Chapel Hill - Department of Economics; IZA Institute of Labor Economics

Naci H. Mocan

Louisiana State University, Baton Rouge - Department of Economics; National Bureau of Economic Research (NBER)

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Date Written: July 1999

Abstract

We use data from a sample of day care centers to estimate the relationships between cost and the quality of the child care service provided, and between revenue and quality. We use a measure of child care quality derived from an instrument designed by developmental psychologists. This measure of quality has been found to be positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we then estimate the objective functions of the firms and compute the supply function for quality. The results indicate that (1) the estimated cost function is inconsistent with the implications of cost-minimization; (2) for-profit firms operate at a positive level of marginal cost, but non-profit firms operate at zero or negative marginal cost; (3) revenue is positively but weakly associated with quality; and (4) the supply of quality is inelastic, with point estimates of the supply elasticity of .04-.05 for both for-profit and non-profit firms. Implications of the results for child care policy are discussed.

Suggested Citation

Blau, David M. and Mocan, Naci H., The Supply of Quality in Child Care Centers (July 1999). NBER Working Paper No. w7225, Available at SSRN: https://ssrn.com/abstract=227562

David M. Blau (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Gardner Hall
Chapel Hill, NC 27599
United States
919-966-3962 (Phone)
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IZA Institute of Labor Economics

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Germany

Naci H. Mocan

Louisiana State University, Baton Rouge - Department of Economics ( email )

Department of economics
Baton Rouge, LA 70803-6308
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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