Child care subsidies and child development

Child care subsidies are an important part of federal and state efforts to move welfare recipients into employment. One of the criticisms of the current subsidy system, however, is that it overemphasizes work and does little to encourage parents to purchase high-quality child care. Consequently, there are reasons to be concerned about the implications of child care subsidies for child development. In this paper, we provide a systematic assessment of the association between subsidy receipt and a wide range of child outcomes. Drawing on rich data from the Early Childhood Longitudinal Study, we document a negative relationship between child care subsidies and child development. In particular, our results suggest that subsidy receipt in the year before kindergarten is associated with lower reading and math test scores and greater behavior problems at kindergarten entry. Some of these negative effects persist until the end of kindergarten. A potential explanation for the poorer outcomes is that subsidized children are more likely to receive intense exposure to low-quality child care.