The Impact of Market Forces on Child Care Provision: Insights from the 2005 Child Care Act in the Netherlands

Abstract

Abstract This article examines the impact of the introduction of market forces on child care provision in the Netherlands. In January 2005, the Dutch government introduced the Child Care Act, replacing the former financing system, which had elements of both supply- and demand-financing, with a fully demand-financing system. As a result, the provision of child care is now driven by market forces. Using data on the geographical location of child care facilities, this article compares the factors affecting the provision of child care in the Netherlands before and after the introduction of the Child Care Act. The results suggest that after the regulatory reform the provision of child care has shifted towards wealthy urbanised areas, characterised by high demand and high purchasing power. This shift has largely benefited for-profit providers particularly active in these markets. In parallel, the results indicate an important drop in child care provision by non-profit organisations, most pronounced in less wealthy rural areas. These findings suggest that the introduction of demand-financing may have implications for the accessibility of child care.