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

In this paper, we examine the impact of U.S. child-care subsidies on the cognitive and behavioral development of children in low-income female-headed families. We identify the effect of subsidy receipt by exploiting geographic variation in the distance that families must travel from home to reach the nearest social service agency that administers the subsidy application process. Using data from the Kindergarten cohort of the Early Childhood Longitudinal Study, our instrumental variables estimates suggest that children receiving subsidized child care in the year before kindergarten score lower on tests of cognitive ability and reveal more behavior problems throughout kindergarten. An auxiliary analysis of longer-run outcomes shows that these negative effects largely disappear by the time children finish first grade.