Events at CERGE-EI

Martin Garcia-Vazquez, M.A.

University of Minnesota, United States

Abstract: Mandatory minimum staff-to-child ratios are a pervasive childcare market regulation in the US, and yet little is known on their effects on children’s skills. This paper builds an equilibrium model of the childcare market and uses it to simulate the distribution of children’s skills at preschool entry under various minimum mandatory staff-to-child ratios. The model allows for rich family heterogeneity, an endogenous distribution of childcare quality at each age, and endogenous wages that clear the market for teachers and childcare workers. I prove identification and estimate the model using both individual-level and state-level data. Counterfactual simulations show that increasing the stringency of minimum mandatory staff-to-child ratios increases the wages of childcare workers by up to 3% and wages of lead teachers by up to 2.5%. Increasing the minimum number of adults per child has different effects for one- and two-parent families. For one-parent families, it increases skills at the right tail of the skill distribution and decreases skills at the bottom. For two-parent families, gains are uniform across the skill distribution. Finally, these overall effects on the skill distribution mask large heterogeneity: Increases in ratios’ stringency translate into big skill gains for some children and large drops for others, and the treatment effect distribution is more dispersed for children born to single mothers. Skill redistribution happens mostly across two types of poor families. Children born to poor families with higher substitution possibilities (more care from family relatives available and assets) experience higher skill losses, whereas children born to families less able to substitute away from paid care (less relative care available and lower assets) experience higher skill gains.

Full Text: The equilibrium effects of state-mandated minimum staff-to-child ratios