Market Mechanisms in the Formal Child Care Market: Why the Slow and Inconsistent Expansion in Supply?

Carlena Cochi Ficano, Hartwick College

In an environment where women continue to work in ever greater numbers and where welfare reform policy explicitly holds maternal employment as its goal, the need for appropriate child care to support working parents and to promote the healthy social and cognitive development of their children is evident. Using a new panel dataset of county-level child care supply measures, this paper contributes to a substantial child care literature by systematically examining and quantifying the determinants of local care expansion for the United States between 1990 and 2000. Results indicate that female employment and state and federal subsidy spending positively and significantly impacted upon actual county level child care quantity expansion, with employment increases generating approximately 10% of the expansion, tax policy generating approximately 15% of the expansion, and direct subsidy spending increases generating approximately one third of the expansion. Poor and rural areas yielded the biggest response to policy intervention.