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Dynamic spatial competition in early education: An equilibrium analysis of the preschool market in Pennsylvania


High-quality preschool is one of the most cost-effective educational interventions, yet the United States invests little in early childhood education. Recent policy discussions call for increasing preschool enrollment and raising the quality provided, especially for disadvantaged children, but equilibrium responses of private providers which make up most of the market generate trade-offs between these objectives. Supply expansion may lower incentives to invest in quality, and price responses to demand subsidies can increase the costs faced by non-subsidized parents. This paper develops a dynamic model of the preschool market to evaluate the effectiveness of policies at achieving these objectives. The model nests a static equilibrium model of spatial competition and preschool choice within a dynamic model of providers’ entry, exit and quality investments. I estimate this model using data on the universe of child-care centers in Pennsylvania. (author abstract)

Resource Type:
Reports & Papers
United States

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