The Impact of Child Care Subsidies on Child Well-Being: Evidence from Geographic Variation in the Distance to Social Service Agencies

Erdal Tekin, Georgia State University
Chris Herbst, Arizona State University

Child care subsidies have become an integral part of federal and state efforts to move economically disadvantaged parents from welfare to work. Although previous empirical studies consistently show that these employment-related subsidies raise work levels among this group, little is known about the impact of subsidy receipt on child well-being. We identify the causal effect of child care subsidies by exploiting geographic variation in the distance that families must travel from home in order to reach the nearest social service agency that administers the subsidy application process. Using data from the ECLS-K, our instrumental variables estimates suggest that children receiving subsidized care in the year before kindergarten score lower on tests of cognitive ability and reveal more behavior problems throughout kindergarten. Our results point to an unintended consequence of a child care subsidy regime that conditions eligibility on parental employment and de-emphasizes child care quality.