Participation in high-quality day care is crucial for both child development and parental employment, particularly for socio-economically disadvantaged families. However, many families struggle to secure spots in such programs, with disadvantaged families facing the greatest barriers to access—a phenomenon referred to as “reverse selection on gains,” whereby those who would benefit most from high-quality day care are the least likely to gain access.
A recent IZA discussion paper by Olivier De Groote and Minyoung Rho analyzes data from a Belgian platform to explore alternative matching systems and policies aimed at addressing these challenges. The study finds that centralized matching systems can significantly improve access for disadvantaged families. Algorithms commonly used in school choice contexts are effective in reducing barriers for late-applying families, improving their acceptance rates.
Affirmative action policies, such as quotas, enhance welfare and enrollment rates for disadvantaged families while substantially lowering their unmatched rates. However, these policies also lead to increased segregation within day care institutions, failing to improve diversity. Moreover, quotas result in a higher unmatched rate for advantaged families.
Expanding capacity is another solution, but it requires substantial government investment. While costly, increasing capacity benefits all families and aligns with parental preferences, making it a valued intervention. In contrast, reforms to day care pricing, such as offering free day care or implementing progressive pricing, have limited impacts. Free day care primarily transfers resources to advantaged families, while progressive pricing, although helpful for disadvantaged families, offers diminishing returns since their current costs are already low.
This study underscores the importance of designing policies that improve access to day care while balancing equity, welfare, and inclusion. Its findings offer practical guidance for creating more equitable and efficient systems.