The Optimal Size of German Child Care Centers and the Impact of Regulation: Estimating the Cost Function of a Regulated Multi-Product Firm

Peter Bönisch and Tagge Sven ()
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Tagge Sven: Martin-Luther-UniversityHalle-Wittenberg, School of Economics and Business, Große Steinstraße 73, 06108 Halle, Germany

Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), 2012, vol. 232, issue 5, 545-566

Abstract: Using a unique data set on German child care centers, we estimate a long-run multi-product cost function for child care provision in Germanywhile taking into account legal minimal labor input restrictions. For a representative child care center we find economies of scale, a U-shaped average cost curve, and indications of diseconomies of scope. The legally stipulated minimum child-to-staff ratio is manifested in a positive Lagrange multiplier, showing that modeling legal restrictions is necessary to avoid misspecification error. Our study provides a useful tool for policymakers in estimating the effects of future demographic change on child care costs.

Keywords: Regulation; child care; multi-product cost function; economies of scale; economies of scope; Germany; Regulation; child care; multi-product cost function; economies of scale; economies of scope; Germany (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:jns:jbstat:v:232:y:2012:i:5:p:545-566

DOI: 10.1515/jbnst-2012-0504

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