Promoting the performance of community childcare centers using the insight from behavioral economics: application of the last-place aversion and first-place seeking theory

ABSTRACT This study examines whether the performance level of community childcare centers that receive financial subsidy from governments can be improved by incorporating the insight from behavioral economics. Specifically, we test empirically whether incorporating the ‘last-place aversion’ and ‘first-place seeking’ theory into the performance evaluation system is beneficial for promoting the performance level of these governmentally funded facilities. Using a regression discontinuity design, we find that the facilities are sensitive to being placed in the lowest and first rank. The effect of being placed in the former is, however, stronger than the latter. We argue that incorporating the two theories is beneficial for making the facilities accountable for their performance.