The Consequences of Implementing a Child Care Voucher Scheme: Evidence from Australia, the Netherlands and the USA

Abstract

AbstractIn the Netherlands, the USA and Australia, public funding has promoted parental choice by introducing a voucher scheme for child care, where parents are free to choose the provider. The policy experiments and the outcomes in these three countries provide useful information about the consequences of introducing a voucher scheme in the child care market. We show the voucher system can be effective in increasing demand, but there can be uneven supply responses. The structure of the voucher income scheme and quality controls affect the nature of the supply response. We argue that voucher schemes must take into account the complex nature of the child care market and the substitutability among free public care, private market care and unpaid household care. To secure quality and access, government also must play a coordinating role that vouchers alone cannot supply.