Tuesday, July 3, 2018

Joseph Hotz


For this post, I interviewed Professor Joseph Hotz. He is the Arts and Sciences Professor of Economics at Duke University. He is a labor economist who specializes in the economics of the family. His research spans the entire life cycle of the family, including the relationships between parents and children at various stages of their development.  

I interviewed Professor Hotz about his paper, “The Impact of Regulations on the Supply and Quality of Care in Child Care Markets.” In this paper, Professor Hotz and his coauthor, Professor Mo Xiao, seek to investigate the effects of policies that are designed to improve the quality of child care in the U.S.   

Child care centers are regulated at the state level. The regulations are mostly focused on insuring the welfare of children in the centers. They include: (1) maximum child to staff ratios, which vary by age of child; (2) maximum group size; and (3) educational requirements of staff. They also might include other rules like background checks for the staff, and some requirements for safety like equipment checks. But these authors focus on the three that I’ve enumerated, which are widely adopted by states. The specificity of the regulations, and their severity, vary by state.

There are also two types of centers: center-based, and home-based or family-based. The home-based centers tend to be smaller, and less stringently regulated. Developmental psychologists generally agree that center-based care is of higher quality, in terms of educational enrichment, than home-based care. 

The authors have detailed data about both types of child care centers in all 50 states, over the period from 1987 to 1997. And, it turns out that there are some interesting unintended consequences of the regulations. For one, the authors find that states that have more stringently regulated center-based care have fewer of these centers; and in particular it is low income neighborhoods that lose these centers, as compared to high income neighborhoods. Families tend to find care close to home, so it seems that these regulations, designed to ensure that centers are developmentally enriching, instead limit access to them; and more so for the families that might need them the most. In fact, as an example, if the average child to staff ratio (7.5) is imposed in low income child care markets, the number of centers would fall by 10%, whereas this requirement would lead to an increase of 8.7% in the number of centers in high income neighborhoods. Further, with fewer center-based care options, these low income children end up in family-based centers, in what is generally considered lower quality care.

There is some good news. The regulations seem to be working: the centers that do remain as a result of these stringent regulations tend to be of higher quality. However, again, these centers tend to be located in high income neighborhoods. So, overall, high income families are the ones benefiting from this care. All in all, it seems that high income families benefit from these regulations, while low income families might struggle to gain access to the best quality centers.  

I asked Professor Hotz if there would be a better way to design child care regulations, to avoid these negative unintended consequences. He told me that he believes that subsidies to low income households should be the focus. Such subsidies do exist, but the emphasis has often been on the parents, with the goal of helping a parent, usually a mother, get off of welfare and into work. The subsidy will get a child into daycare, but with less attention paid to the quality of the care. He argues that the focus should be on the child. For example, it should not be a requirement that the mother must work in order to receive the subsidy. Developmental psychologists have made some headway on this issue, and it’s made some progress in Congress. But it has not gotten off the ground yet.  

I asked Professor Hotz about some of his other recent work. In this paper, he and his coauthors are studying families with stepkin. They are interested in learning about how much time stepparents spend with their adult stepchildren, and how much time adult children spend with their elderly stepparents. 

Let’s talk! I would love to know what you think about this example of unintended consequences. Please submit comments and questions.