Does State Preschool Crowd-Out Private Provision? The Impact of Universal Preschool on the Childcare Sector in Oklahoma and Georgia

Abstract

The success of any governmental subsidy depends on whether it increases or crowds out existing consumption. Yet to date there has been little empirical evidence, particularly in the education sector, on whether government intervention crowds out private provision. Universal preschool policies introduced in Georgia and Oklahoma offer an opportunity to investigate the impact of government provision and government funding on provision of childcare. Using synthetic control group difference-in-difference and interrupted time series estimation frameworks, we examine the effects of universal preschool on childcare providers. In both states there is an increase in the amount of formal childcare. While there is no crowd-out in Oklahoma, some of the government subsidized preschool in Georgia replaces childcare that would have occurred otherwise. We find the largest positive effects on provision in the most rural areas, a finding that may help direct policymaking efforts aimed at expanding childcare.