Does State Preschool Crowd-Out Private Provision?

The success of any governmental subsidy depends on whether it increases or crowds out existing consumption. Yet to date there has been little empirical evidence, particularly in the education sector, on whether government intervention crowds out private provision. Universal preschool policies introduced in Georgia and Oklahoma offer an opportunity to investigate the impact of government provision and government funding on provision of childcare.

This study examines the effects of universal preschool on childcare providers. In both states there is an increase in the amount of formal childcare. In Georgia, both the private and public sectors grow, while in Oklahoma, the increase occurs in the public sector only. The differences likely stem from the states' choices of provision versus funding.

The study finds the largest positive effects on provision in the most rural areas, a finding that may help direct policymaking efforts aimed at expanding childcare.