Faculty seminar with Bettina Siflinger

Bettina Siflinger - CV

Title: The Impact of Childcare Policies on Mental Health and Education: Evidence from Subsidy Changes in the Netherlands

Abstract: In this paper, we estimate the causal effect of daycare utilization on children's ADHD drug use and schooling outcomes in the Netherlands. The Dutch childcare market is privately organized but heavily subsidized by the government. Each year, private providers set a new hourly childcare price, and the government adjusts its subsidy policy, leading to considerable temporal and regional variation in childcare net prices. Using different Dutch administrative data, we exploit these price variations in a simulated instrumental variable approach proposed by Borusyiak and Hull (2023). The method provides a strong and policy-relevant instrument that captures the differences between actual childcare and counterfactual prices. For the extensive margin of childcare utilization, we find that households are highly price-sensitive and react to price changes by deferring entry to childcare. Children attending childcare use ADHD drugs less often at all ages and have better test scores throughout primary school and in the final national test. At the intensive margin, our results reveal considerable heterogeneity in the household's reaction to price changes in the first stage, which is most pronounced for households constrained by the limited availability of childcare hours and those with lower household income. By taking account of these heterogeneities in the second stage, our results indicate that more hours spent in childcare increases ADHD drug use as well as the test score rank at the age of 12. Our results have important implications for designing childcare markets in private market settings, such as in the US or the UK, and their consequences for children's development.