The unintended exit: public childcare expansion and the crowding-out of non-public facilities in South Korea

This study examines how the expansion of public childcare is associated with the exit dynamics of existing childcare facilities in South Korea. Using comprehensive facility-level data covering all operating and closed childcare centres, we estimate fixed-effects models with lagged entry variables. Newly established public childcare centres are associated with a significant increase in exits among non-public facilities, whereas public facilities are largely unaffected by new public entry. We interpret this pattern as evidence that public expansion restructures local childcare markets. This market adjustment is not necessarily welfare-reducing: public expansion may improve affordability, accessibility, and service quality even as it changes the provider mix. Our findings therefore suggest that evaluations of public childcare expansion should consider both the benefits of public provision and the ownership-specific adjustment pressures that arise in local childcare markets.