The Economic Rationale for Investing in Children: A Focus on Child Care. Introduction


Many public policies affect child well-being. These policies are generally analyzed in isolation, although the issues involved are often similar. This paper draws lessons from evaluations of health care policy for the debate over child care policy. It begins with a discussion of the goals of child health policy, and the theoretical economic justifications for government intervention in this market. At each stage, the implications for the child care market are highlighted. I then turn to a discussion of the evidence regarding the effectiveness of recent expansions of public health insurance for pregnant women, infants, and children, again with a view towards drawing out implications for child care policy.

One of the most noteworthy child health initiatives over the past 20 years has been a series of expansions of public health insurance to low income children, which culminated in the $40 billion Child Health Insurance (SCHIP) initiative of 1997. These initiatives received a remarkable degree of bipartisan support, and have sparked a great deal of research. Hence, much of this review focuses on lessons from the evaluation of these insurance extensions.

The conclusions include: The desirability of setting clear goals for policy; the likely importance of liquidity constraints, information failures, and externalities in the market for child care; the fact that eligibles may not participate (low takeup) or that publicly provided programs may "crowdout" private childcare and that outreach to eligible non-participants may be necessary; the need for rigorous evaluation of child care quality and its long-term effects; and the fact that since the family is still the primary supplier of child care, policies that support good parenting are likely to be an important component of sound child care policy.