The Park Place Economist


This study considers the question: Does participating in daycare outside the home put the child at a future disadvantage? However, there appears to be two forces at work which may result in two different answers to this question. One or two possibilities may happen when a child participates in daycare. First, the child loses nurturing time with his or her parents. This effect, the lost time effect, should hinder a child’s development. The second effect is the purchased input effect. A child who is in daycare spends less time with his or her parents, but that parent is able to spend that time earning income. This income can then be used to purchase inputs to improve the child’s development. However, it is unclear, a priori, which effect dominates. The goal of this study is to determine whether the lost time effect or purchased input effect is stronger. Therefore, by looking at the net effect of these two competing forces the question of whether or not a child is adversely affected by daycare will be answered.