Almost every state government intervenes in the market for child care services by providing quality ratings. This paper is about the effect of quality ratings children in Minnesota, with a particular focus on how the benefits from the ratings are distributed. Theory suggests an important reason why the impact of product quality ratings on consumers will be heterogeneous. Consumers benefit from quality information only to the extent that the information has a marginal impact on the choices made. The effect of quality ratings thus depends on what choices are available. Using geocoded panel data on Minnesota child care centers, paired with block group level demographics from the American Community Survey, I empirically investigate the effect of Minnesota’s Parent Aware provider quality ratings on the number of children who use high quality providers. I estimate the treatment effect of the ratings separately from endogenous selection of the ratings by using a difference-in-differences style approach that relies on providers who switch ratings status during the data period. In order to minimize the effect of arbitrarily chosen market boundaries I treat all of Minnesota as a single market and include distance in the demand model, so that the extent of competition between particular providers depends in a realistic way on the geographic distribution of households and providers, replacing assumptions about market boundaries with assumptions about the structure of travel costs. I find that consumers respond to the ratings and are significantly more likely to choose a provider that receives the highest possible rating of Four Stars compared to an unrated provider. Estimates of welfare at the block group level suggest that density is the most important factor driving variation in the regional benefits of Parent Aware. Importantly, most low-income block groups are in dense areas with enough variation in locally available providers that the benefits of the ratings are high.

 
 
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About

I am a Postdoctoral Associate at the University of Minnesota CFANS working with Prof. Elizabeth Davis. I received my PhD in Economics in 2020 from the University of Minnesota. I use structural methods to investigate public policy questions, with a focus on markets for early childhood services.