We study the effects of a nationwide block-granted program that subsidizes low-income families’ use of child care services, focusing on Minnesota’s implementation of this program through subsidies for care delivered by private providers. Using school districts to represent local child care markets, we determine how much is spent through these subsidies in each local area each year. Changes in funding within local areas over time allow us to estimate the causal effects of public funding on two critical aspects of the private child care market: capacity and price. We find that increased subsidies produced relatively large increases in total local child care capacity but only small increases in average prices. In our results, the supply of private child care services was highly elastic, meaning that local resources expanded to meet increased demand with relatively little adverse effect on unsubsidized families. Overall, our estimates imply a supply elasticity of 10.7—for every 1 percent price increase driven by the increased subsidy, total capacity increased by more than 10 percent. We also find that these public investments catalyze child care markets and induce additional families to use care and to start paying their own private resources into the sector. An increase of about $4,200 in public subsidy created one new full-time child care slot, which has a value of about $10,000, with the difference coming from new private funds. These results suggest that relatively modest public investments can have large impacts. (author abstract)