A Three-Sector Model of Day Care Center Services

Political pressures for increased subsidization of child care and tax and welfare reform have combined with sociodemographic trends to raise important empirical questions about the market for day care services. This paper addresses a number of these questions in the context of a model that treats government, private nonprofit, and for-profit producers separately. Data from North Carolina for 1973 are used in the analysis. It is shown that the three types of centers produce quite different types of care for different markets. Market level demand functions are estimated for the care of each type of center using Tobit analysis. The sectors show different responses to demand determinants such as income and labor force opportunities. Some implications of the estimates for public policy are discussed.