Can’t buy Mommy’s Love? Universal Child Care and Children’s Long-term Cognitive Development: Evidence from a Natural Experiment

What happens to children’s long-run cognitive development when introducing
universal high-quality childcare for 3-year-olds mainly crowds out family care? To
answer this question, we take advantage of a sizeable expansion of publicly subsidized
full-time high-quality childcare for 3-year-olds in Spain in the early 1990s. Identification
relies on variation in the initial speed of the expansion of childcare slots across
states. Using a difference-in-difference approach, we find strong evidence for sizeable
improvements in children’s reading skills at age 15 (0.15 standard deviation) and weak
evidence for a reduction in grade retentions during primary school (2.5 percentage
points). The effects are driven by girls and disadvantaged children.