Center-based formal childcare closes gaps, others may widen them: How childcare arrangements shape early educational inequality

This short article investigates how childcare arrangements under age three affect early social inequalities in children's competencies using a novel decomposition approach ( Yu and Elwert, 2024 ). This framework comprehensively assesses the relevance of childcare arrangements and the channels through which they influence social disparity levels: unequal exposure (prevalence), heterogeneous effects, and selection (within-group treatment propensity). Drawing on the newborn cohort of the German National Educational Panel Study (NEPS - SC1), we evaluate the influence of center-based early childhood education and care (ECEC), family day care, grandparents/relatives care, and exclusive parental care under the age of three on children's competencies in mathematics and vocabulary at ages 4 and 5. Findings confirm that center-based ECEC is the most effective at reducing social disparities, particularly benefiting low-socioeconomic status (SES) children. The heterogeneous effect emerges thus as the only relevant mechanism that tackles early disparities. Conversely, although not statistically significant, exclusive parental care and family day care appear to slightly favor high-SES children and may be detrimental to less advantaged groups. Overall, this approach comprehensively evaluates how childcare arrangements shape early social inequalities in children's competencies.