Effects of Child-Care Vouchers on Price, Quantity, and Provider Turnover in Private-Care Markets

We harness changes in funding for a voucher that subsidizes private child-care services to quantify funding effects on local service capacity and prices. We also estimate how increased funding affects provider entry rate, exit rate, and highly rated provider market share. The evidence shows that an additional US$100 in private voucher funding per local young child would (1) raise the number of private-provider slots by 0.024 per young child, (2) raise average prices by US$0.56 per week, driven by a price increase among incumbents, and (3) induce provider entry by 0.4 percentage points. The estimates imply elastic supply, estimated at 11.6; funding expands slots with only limited price increases.