On day care and large impacts

kinder

“Stop whining! You kids are soft. You lack discipline. Think of the cognitive benefits.”

When I was five I distinctly remember my parents debating whether or not they should leave me at a day care centre for the afternoon, or bring me with them to the showing of Tim Burton’s Batman. They eventually decided I was old enough to come along. I was absolutely terrified, especially during that scene where the Joker shocked some guy to death with an electric buzzer.

I’m sure my traumatized state detracted from my parent’s enjoyment of Michael Keaton’s performance. Indeed, there are a lot of reasons to think why day care might be a valuable service for households – not only because they can go off and enjoy Batman films unhindered by easily-scared children, but because – if the child is young enough – the alternative to to day care involves someone in the family staying home, rather than working or going to school.

Today at the Young Lives conference I saw Pedro Carneiro present a paper (see the talk here) which suggests that the effects of access to daycare might actually seriously improve household welfare, at least within the context of poor slums in Brazil. Carneiro was luck enough to stumble across a nice national experiment: although there were several eligibility factors, and a little bit of discretionary selection, most households living in the favelas only received access to state-provided daycare if they were allocated a slot through a lottery. Thus it was relatively simple to see how households fared several years later after being allocated a slot.

The results were a bit astonishing – household income went up (8%!), as did the labour supply of the carer (usually the mother). Children also fared better in terms of cognitive and anthropometric outcomes. Carneiro very much sold this as as story of day care freeing up the time of the carer, which led to more work and thus more income. It is still unclear whether or not the effects on children were directly due to the day care centres themselves or indirectly through the change in household and carer characteristics. This is kind of an important distinction – if all the effects are driven by the latter channel, then we might focus on just getting kids out of the favelas for the day, rather than worrying as much about the educational quality of day care. If the latter – especially if carer work effort is one of the activities which are complementary to child education (I see my kid is learning a lot at the day care centre, so I’ll work a bit more to buy, for example, some books for her to read at home).

During the discussion, I asked a question which economists love to ask when they aren’t sure what else to ask: if there are $100 dollar bills on the sidewalk, why is no one picking them up? Translation: if day care in Brazil offers these amazing returns to people living in favelas, why aren’t we seeing either A) a lot more private provision or B) more local collective action, where neighbours coordinate to watch each others kids and free up time to go out and work more. Carneiro argued that not everyone understood these benefits – I found this hard to believe, given the extremely high levels of demand for day care (50% of those who didn’t win the lottery still managed to get their kid into a day care centre). Lee gave a more convincing answer: perhaps violent favelas are just awful places to have daycare centres.

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