Quality Adjusted Cost Function in Japanese Child Care Market: Evidence from Micro-level Data

Satoshi Shimizutani and Haruko Noguchi

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: This is the first study that uses facility-level data to evaluate the cost efficiency of the child care market in Japan after controlling for quality of services. Japanese households in urban areas suffer from a severe undersupply of child care, and inefficient operation in public centers is allegedly responsible for the bottleneck. We take advantage of our unique and unusually rich data set on Japan's child care centers collected in summer 2002. We estimate quality-adjusted cost functions to compare the efficiency between public and private licensed facilities. Our findings demonstrate that public centers are more inefficient than private facilities by 10 to 20 percent. Moreover, government subsidies contribute to the inefficiency in public centers. These findings suggest that efficiency improvements in public-owned centers and reduction of subsidies are indispensable for the breakthrough of the bottleneck of the child care supply in Japan.

Pages: 24 pages
Date: 2003-08
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Persistent link: https://EconPapers.repec.org/RePEc:esj:esridp:057

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