Quality Adjusted Cost Functions for Child Care Centers

Using a newly compiled data set, this paper estimates multi- product translog cost functions for 399 child care centers from California, Colorado, Connecticut, and North Carolina. Quality of child care is controlled by a quality index, which has been shown to be positively related to child outcomes by previous research. Nonprofit centers that receive public money, either from the state or federal government, (which is tied to higher standards), have total variable costs that are 18 percent higher than other centers, keeping quality of services constant. No statistically significant differences between general categories of for-profit and non-profit centers are detected. Furthermore, various types of nonprofits are not distinguishable from their for-profit counterparts. In agreement with previous studies, the data show that the average quality of center-based child care is between 'minimal' and 'good', and it costs 13 cents per hour per child to increase this average quality to the level considered developmentally appropriate by child care experts.

Can Consumers Detect Lemons? Information Asymmetry in the Market for Child Care

This paper applies direct tests for adverse selection and moral hazard in the market for child care. A unique data set containing quality measures of various characteristics of child care provided by 746 rooms in 400 centers, as well as the evaluation of the same attributes by 3,490 affiliated consumers (parents) is employed. Comparisons of consumer evaluations of quality to actual quality show that, after adjusting for scale effects, parents are weakly rational. The hypothesis of strong rationality is rejected, indicating that parents do not utilize all available information in forming their assessment of quality. Parent characteristics impact the accuracy of their evaluations. An analysis of easy-to-observe versus difficult-to-observe aspects of quality reveals that parents are trying to extract signals more heavily in cases of difficult-to-observe items. A comparison of parent assessments to results obtained from standard quality production functions reveals that, for the most part, parents interpret the signals incorrectly. The results demonstrate the existence of information asymmetry and adverse selection in the market. There is some limited evidence for moral hazard as nonprofit centers with very clean reception areas tend to produce lower level of quality for unobservable items. These results provide an explanation for low average quality in the child care market.

Guns, Drugs and Juvenile Crime: Evidence from a Panel of Siblings and Twins

Using a nationally-representative panel data set of U.S. high school students (AddHealth data) that contains a relatively large sample of siblings and twins, the paper investigates the impacts of gun availability at home and individual drug use on robbery, burglary, theft and damaging property for juveniles. Using a variety of fixed-effects models that exploit variations over time, the results show that gun availability at home increases the propensity to committing robbery, burglary and theft by about two percentage points for juveniles but has no impact on damaging property. It is unlikely that gun availability is merely a measure of the unobserved home environment because gun availability does not influence other risky or bad behaviors of juveniles. The results show that having access to guns increases the probability of being cut or stabbed by someone and of someone pulling a knife or gun on the juvenile. Estimates obtained from models that exploit variations over time and between siblings and twins indicate that the median impact of cocaine use on the propensity to commit various types of crimes is 23 percentage points. The impact of using inhalants or other drugs is an increase in the propensity to commit crime by 14 and 18 percentage points, respectively.

A Time-Series Analysis of Crime and Drug Use in New York City

This report summarizes the results of a project which investigated the time series interrelationships between crime, drug use, police, and arrests in New York City. We use monthly data from 1970 through 1990 for New York City. We plot the individual time series for five different non-drug crimes, arrest rates for these crimes, drug deaths, number of police officers, and drug arrests in New York City. We find that drug usage, as proxied by drug deaths, increased from the mid-1980's to about 1988-1989. At the same time, felony drug arrests increased substantially. During the mid-1980's, there were increases in murders, assaults, and motor vehicle thefts. Robberies increased in the later 1980s and burglaries declined throughout the 1980s. Arrest rates and total arrests for non-drug crimes did not decline during this period of increased drug arrests. In a multivariate analysis, we found that the three property crimes investigated - robberies, burglaries and motor vehicle thefts - increased when there were unexpected increases in drug usage. We did not find such a relationship between drug use and murders or assaults, holding constant arrest rates and police. In addition, we found evidence of police deterrence, either directly, or through arrests, of property-related and assault offenses, but not for murders. Thus, in a time-series approach, we are able to find a causal relationship between drug usage and property-related felonies.

Nonprofit Sector and Part-Time Work: An Analysis of Employer-Employee Matched Data of Child Care Workers

This paper uses a rich employer-employee matched data set to investigate the existence and the extent of nonprofit and part-time wage and compensation differentials in child care. The empirical strategy adjusts for workers' self-selection into the for-profit or nonprofit sectors, into full-time or part-time work, as well as unobserved worker heterogeneity using a discrete factor model. We find differences between the regimes (full-time for-profit, full-time nonprofit, part-time for-profit, part-time nonprofit) in the way in which human capital of the workers are rewarded. There is substantial variation in wages as a function of employee characteristics, and there is variation in wages within sectors. The results indicate that part-time jobs are good' jobs in center-based child care. Furthermore, despite the evidence supporting the labor donation hypothesis, our results indicate the existence of nonprofit wage and compensation premiums, which support the property rights hypothesis.

Skill-biased Technological Change, Earnings of Unskilled Workers, and Crime

This paper investigates the impact of unskilled workers' earnings on crime. Following the literature on wage inequality and skill-biased technological change, we employ CPS data to create state-year as well as state-year-and (broad) industry specific measures of skill-biased technological change, which are then used as instruments for unskilled workers' earnings in crime regressions. Regressions that employ state panels reveal that technology-induced variations in unskilled workers' earnings impact property crime with an elasticity of -1, but that wages have no impact on violent crime. The paper also estimates, for the first time in this literature, structural crime equations using micro panel data from NLSY97 and instrumenting real wages of young workers. Using state-year-industry specific technology shocks as instruments yields elasticities that are in the neighborhood of -2 for most types of crime, which is markedly larger than previous estimates. In both data sets there is evidence for asymmetric impact of unskilled workers' earnings on crime. A decline in earnings has a larger effect on crime in comparison to an increase in earnings by the same absolute value.

Catholic Schools and Bad Behavior: A Propensity Score Matching Analysis

Although there is a sizeable literature on the effect of private school attendance on academic student outcomes, the number of studies that investigate the impact of school sector on non-academic outcomes is limited. Using a rich data set, we analyze the impact of Catholic school attendance on the likelihood that teenagers use or sell drugs, commit property crime, have sex, join gangs, attempt suicide, and run away from home. We employ propensity score matching methods to control for the endogeneity of school choice. Catholic school attendance reduces the propensity to use cocaine and to have sex for female students. However, it increases the propensity to use and sell drugs for male students.

Pardons, Executions and Homicide

This paper uses a data set that consists of the entire history of 6,143 death sentences between 1977 and 1997 in the United States to investigate the impact of capital punishment on homicide. This data set is merged with state panels that include crime and deterrence measures as well as state characteristics to analyze the impact of executions and governors' pardons on criminal activity. Because the exact month and year of each execution and pardon can be identified, they are matched with criminal activity in the relevant time frame. Controlling for a variety of state characteristics, the paper investigates the impact of the execution rate, pardon rate, homicide arrest rate, the imprisonment rate and the prison death rate on the rate of homicide. The models are estimated in a number of different forms, controlling for state fixed effects, common time trends, and state-specific time trends. Each additional execution decreases homicides by 5 to 6, while three additional pardons generate one to 1.5 additional homicides. These results are robust to model specifications and measurement of the variables.

The Supply of Quality in Child Care Centers

We use data from a sample of day care centers to estimate the relationships between cost and the quality of the child care service provided, and between revenue and quality. We use a measure of child care quality derived from an instrument designed by developmental psychologists. This measure of quality has been found to be positively associated with child development. Taking the estimated cost-quality and revenue-quality relationships as given, we then estimate the objective functions of the firms and compute the supply function for quality. The results indicate that (1) the estimated cost function is inconsistent with the implications of cost-minimization; (2) for-profit firms operate at a positive level of marginal cost, but non-profit firms operate at zero or negative marginal cost; (3) revenue is positively but weakly associated with quality; and (4) the supply of quality is inelastic, with point estimates of the supply elasticity of .04-.05 for both for-profit and non-profit firms. Implications of the results for child care policy are discussed.