Daycare, Durables, and Credit Constraints: Evidence from Rio de Janeiro

• Development Workshop

Date and Location

Monday, January 26, 2015, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

The primary goals of public daycare programs are usually to increase female labor force participation and, consequently, incomes and to support child development. Using panel data from Rio de Janeiro in the context of randomized selection for daycare, we first find that access to daycare increases household income in the short-run but that this effect largely dissipates once all children are age-eligible for preschool or school. Through a switching regression model, however, we show that, particularly for constrained households, this temporary boost in income translates into greater ownership of durable goods even in the medium-term. As the ownership of durable goods has positive implications for child health and education, we find (an additional) positive effect of daycare on child development: for credit constrained households, temporary increases in income provided by access to daycare can improve children's living environments during crucial development years.