Cutting from the future? Impact of a subsidy reduction on child care quality in the Netherlands

Abstract

High quality child care has been consistently linked with child development and future life outcomes. We examine how process quality in child care centers is influenced by the reduction of child care subsidies. The analysis is based on a 2012 reduction in subsidies for Dutch parents. Exploiting the different types of funding for child care centers in the Netherlands, we provide linear and non-linear difference-in-difference estimates of the effects subsidy cuts have on child care quality. The results show that the subsidy reduction had a negative effect on quality, and the effects are especially strong for higher quality centers.