Which children benefit from non-parental care?

This paper investigates the relationship between non-parental care and toddlers’ behavioral outcomes using data from Australia. In particular, we explore heterogeneity in the relationship using the unique data on quality attributes: carer/child ratio, share of qualified staff, and expert ratings. The results suggest that full-time non-parental care, particularly center care, is negatively associated with toddlers’ behavioral outcomes. The negative association is however mitigated when centers have a larger number of carers per child. The negative association between non-parental care and behavioral outcomes also appears to be larger for children with better-educated parents.

► Evidence is scarce on the heterogeneity in the impact by the quality of care.
► We provide a new set of results on the heterogeneity issue.
► We also address the issue of unobserved heterogeneity.
► Full-time center-based care has a negative effect on behavioral outcomes.
► The negative association is also found to be concentrated among high-SES families.