Lena Janys, Newcastle University Business School

Price of Care, Cost of Growth: Unraveling the Causal Effect of Childcare Utilization on Children’s Mental Health and Education in the Netherlands

Abstract

In this paper, we estimate the causal effect of daycare utilization on children's ADHD drug use and schooling outcomes in the Netherlands. The Dutch childcare market is privately organized but heavily subsidized by the government. Each year, private providers set a new hourly childcare price, and the government adjusts its subsidy policy, leading to considerable temporal and regional variation in childcare net prices. Using different Dutch administrative data, we exploit these price variations in a simulated instrumental variable approach proposed by Borusyak and Hull (2023). The method provides us with a strong and policy-relevant instrument that captures the differences between actual childcare prices and exogenous counterfactual prices. Using an ordered marginal treatment effect estimator, we quantify the dose-response function of weekly days in childcare. We find that, on average, additional days spent in childcare reduce the probability of being prescribed ADHD medication later in life. Additional days in childcare raise test scores, but only up to four days, after which additional childcare attendance slightly reduces test scores. We find significant heterogeneity in both the response to price changes (first stage) and in the second stage treatment effect.

Lena Janys is  an Econometrician at Newcastle University Business School and a research fellow at IZA. She works in both theoretical- and applied microeconometrics, primarily within health and labour economics. She was recently awarded a Leverhulme Trust Research Fellowship for her work on Daycare, Mental Health, and Education.

You can read more about Lena Janys here

CEBI contact: Miriam Wüst