Decomposing the Role of Childcare Arrangements in Early Educational Inequalities by Socioeconomic Background

This research note investigates how childcare arrangements under age three affect early social inequalities in children’s competencies, relying on a novel decomposition approach (Yu and Elwert 2023). This novel approach offers a comprehensive evaluation of childcare arrangements, revealing, under a potential outcome framework, their overall relevance and the specific channels driving social disparities: unequal exposure (prevalence), heterogeneous effects, and selection (within-group treatment propensity) Using the newborn cohort of the German National Educational Panel Study (NEPS - SC1), we assess the impact of early childhood education and care (ECEC), family day-care, grandparental care, and exclusive parental care on children’s competencies in mathematics and vocabulary at ages 4 and 5. Findings reveal center-based ECEC as the most effective in reducing social disparities, benefiting children from lower socio-economic backgrounds. Conversely, exclusive parental care and family day-care widen disparities, favoring higher socio-economic groups while negatively affecting those from lower ones. This approach proved highly useful in identifying both beneficial and detrimental impacts, offering valuable insights into the nuanced role of childcare arrangements in shaping early social inequalities in children’s competencies.