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Childcare Choices and Children’s Cognitive Achievement: The Case of Single Mothers (WP-06-09)

Raquel Bernal and Michael P. Keane

The authors evaluate the effects of home inputs on children’s cognitive development using the sample of single mothers from the National Longitudinal Survey of Youth (NLSY). Important selection problems arise when trying to assess the impact of maternal time and income on children’s development. To deal with this, they exploit the (plausibly) exogenous variation in employment and childcare use by single mothers generated by differences in welfare regulations across states and over time. In particular, the 1996 welfare reform act along with earlier state policy changes adopted under federal waivers, generated substantial increases in work and childcare use. Thus, the authors construct a comprehensive set of welfare policy variables at individual and state levels and use them as instruments to estimate child cognitive ability production functions. They use local demand conditions as instruments as well.

The results indicate that the effect of childcare use is negative, significant, and rather sizeable. In particular, an additional year of childcare use is associated with a reduction of 2.8 percent (.15 standard deviations) in child test scores. But this general finding masks important differences across types of childcare, children’s ages, and maternal education. Indeed, only informal care used after the first year leads to significant reductions in child achievement. Formal care (i.e., center-based care and preschool) does not have any adverse effect on cognitive outcomes. In fact, these estimates imply that formal care has large positive effects on cognitive outcomes for children of poorly educated single mothers. Finally, the authors also provide evidence of a strong link between children’s test scores at ages 4, 5, and 6 and their completed education.

Raquel Bernal, Department of Economics, Northwestern University

Michael P. Keane, Department of Economics, Yale University

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