The effects of infant daycare on later-in-life employment outcomes

Abstract

This paper first develops a theoretical model of the returns to daycare, which attempts to show that families enroll their children into daycare based on its expected benefits and costs. The paper then moves to an empirical study that seeks to determine whether enrolling an infant in daycare affects his or her later-in-life employment and poverty status. To identify the causal effect of interest, the econometric approach employs a recently developed panel estimator that accommodates the dynamic nature of later-in-life employment and income, while also controlling for unobserved heterogeneity. The main finding is that, although infant daycare enrollment appears to correlate with positive later-in-life outcomes, addressing potential bias in that link renders the estimated effects highly imprecise, such that one cannot confidently conclude whether daycare helps or hinders later-in-life outcomes.