| Whitebook, Howes and Phillips (1990) have rated the quality of child care in the U.S., on average, as 'mediocre'. However, it is not clear what is responsible for this mediocre quality. In this dissertation, I examine two competing, but, not mutually exclusive, hypotheses regarding this issue; is it due to the lemons market caused by asymmetric information or due to the lack of demand for quality on the part of parents?; First, I examine suppliers' behaviors when a voluntary disclosure system is implemented as a remedy for the asymmetric information problem. Specifically, I look into a pilot project, 'Child Care Programs of Excellence', which evaluates the quality of care on-site and certifies providers free of charge for those who voluntarily participate. Specifically, I explore whether only high quality providers are drawn to a voluntary quality rating system. To answer this question, I estimate a probit model of participation in the voluntary quality evaluation, based on input measures of quality. The empirical estimation suggests that higher quality providers are more likely to participate in the evaluation, although the results also suggest that some low quality providers choose to be evaluated as well. I attribute these results to some features of 'CCPOE' program such as opt-out rights and the lack of monetary costs for the participants.; Second, I examine the possibility of lack of demand for quality on the part of parents. As a baseline, I replicate Hagy (1998) and estimate the demand for ratios using a hedonic approach. I confirm previous findings that lowering the implicit price for ratios does not influence its demand. However, these findings do not rule out the possibility that parents differ from child care experts in what they believe constitute quality child care. Therefore, as an attempt to answer whether or not quality is a significant factor in parents' decision, I estimate the probability of parents' desire to switch. The result shows that global quality ratings by parents are the most significant predictors. Then, I decompose the global quality ratings by parents to determine whether there exist some discrepancies between child experts and parents. The results suggest that the structural measures of quality such as ratios are not significant predictors, while features related to curriculum or the provider are significant. This implies that there, indeed, exists some discrepancies between developmental psychologist and parents. |
