The More Public the More Private? Some Evidence from Childcare Providers

We use Italian data at the municipal level (2000-2008) to address the importance of qualitative elements when an expansive policy targeting a public service is planned. In particular, we focus on the attempt to increase the level of childcare supply at the local level. We test our hypothesis - investing in service quality (i.e. flexibility of the service such as longer opening hours or different types of attendance schemes) is as important as increasing its quantity - explaining the presence of private providers in municipalities using count data analysis. We exploit the variation in the demand for private childcare to assess how the demand responds to both changes in the quantity of public childcare (i.e. number of slots per resident children) and in the flexibility of public services. We find that when public providers are more flexible the public sector can capture part of private users. Our conclusions draw policy directions, which could be useful for other European countries that recently have tried to improve their childcare coverage as a consequence of the Lisbon targets for 2010.