An Empirical Investigation of Firms' Responses to Minimum Standards Regulations

Chipty, Tasneem; Witte, Ann Dryden

doi:10.3386/w6104

Cited by 30 publications

(33 citation statements)

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“…Under one strategy, we make use of sets of representative standards for labor intensity and staff qualifications, such as staff-child ratio requirements for infants and the education requirement for directors since most states regulate these dimensions and they differ across states. 19 This strategy is used by Chipty and Witte (1997), Blau (2007) and Currie and Hotz (2004). Following Blau (2003), we also construct summary indices of the stringency of state standards for labor intensiveness and staff educational qualifications.…”

Section: State Child Care Center Regulationsmentioning

confidence: 99%

The Impact of Regulations on the Supply and Quality of Care in Child Care Markets

Hotz

Xiao

2005

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We examine the impact of state child care regulations on the supply and quality of care in child care markets. We exploit panel data on both individual establishments and local markets to control for state, time, and, where possible, establishment-specific fixed effects to mitigate the potential bias due to policy endogeneity. We find that the imposition of regulations reduces the number of center-based child care establishments, especially in lower income markets. However, such regulations increase the quality of services provided, especially in higher income areas. Thus, there are winners and losers from the regulation of child care services. induces child care centers to use less-skilled aides and fewer teachers. Second, to the extent that imposing regulations actually eliminates lower quality child care services, some parents and children -especially those who are poor -may be "priced out" of the market for such services or face inadequate supplies of such services. Finally, states only regulate part of the market for nonparental child care services and the stringency of these regulations can vary across types of child care providers. While most states regulate the providers of organized child care (e.g., childcare centers), they often impose fewer and less stringent regulations on other non-relative forms impose on the learning of other children (Edward Lazear, 2001).3 of care (e.g., family day care homes), and typically do not regulate care provided by relatives (e.g., grandparents) at all. Because compliance with regulations usually is costly and can result in higher prices, some parents may be induced to substitute away from regulated providers so their children may end up in lower quality care.To determine the intended and unintended consequences of the child care regulation, we investigate the impact of imposing minimum standards on the inputs used in production of child care services on supply and quality of such services. For this purpose, we have assembled a unique panel dataset obtained by merging child care center data from the Census of ServicesIndustries (1987, 1992, and 1997) with state regulation data and information on the accreditation of child care centers by the National Association of Education for Young Children (NAEYC).The resulting data set contains detailed information on establishments, including their legal form of organization, tax-exempt status, revenue, payroll, employment and accreditation, as well as the state-level child care regulations on various aspects of the provision of child care services.Furthermore, we have gathered state-level data on family day care homes for the corresponding Census years to examine the cross-effects of center regulations on this alternative form of child care.Ours is not the first study seeking to estimate the causal effects of child care regulations on the supply side of the child care market. We have three sets of findings. First, the imposition and greater stringency of regulations of child care centers reduces the number of these cent...

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Section: State Child Care Center Regulationsmentioning

confidence: 99%

The Impact of Regulations on the Supply and Quality of Care in Child Care Markets

Hotz

Xiao

2005

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“…Rather than creating barriers to trade, appropriate minimum quality standards intensify price competition among firms through the narrowing of quality disparities, thereby lowering (quality-deflated) prices, raising qualities and expanding trade and market coverage. These results depend crucially on the price competition assumption for which there is some empirical evidence (Chipty and Witte, 1997).…”

Section: Resultsmentioning

confidence: 99%

“…Defining the quality-deflated prices of the low-and high quality producers as 3 For individual θ to be indifferent between buying a unit of the good or none at all, it must be true that θq i − p i = 0. Hence, θ= p i q i .…”

Section: The Unregulated World Market Equilibriummentioning

confidence: 99%

Vertical product differentiation, minimum quality standards, and international trade

Petropoulou

2012

Oxford Economic Papers

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Regulatory standards that control the quality of vertically differentiated products are becoming increasingly important for industrial production and international trade. There is considerable debate surrounding the possible effects of standards on international trade and social welfare. This paper examines the implications of minimum quality standards (MQSs) in a free trade environment with two countries and two firms competing in prices in an industry characterised by vertical product differentiation. Mild minimum quality standards are shown to raise welfare by increasing the quality, lowering the (quality-adjusted) price of traded goods and increasing market coverage. Nevertheless, cross-country externalities result in governments choosing MQSs above or below the world optimum thereby reducing welfare by inducing exit and reducing competition. The model suggests that international organisations, such as the International Organization for Standardization (ISO), may be better positioned to improve welfare outcomes through the development of product standards.Keywords: International Trade, JEL Classification Numbers: * I would like to thank the ESRC for their financial support and Tony Venables, Alejandro Cunat, Steve Redding, Henry Overman, Gilles Duranton and Kwok Tong Soo for their invaluable comments. Moreover, I would also like to thank all seminar and conference participants at the London School of Economics, and elsewhere, for their feedback. All errors are mine.

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“…132ff) evaluates MQS from the broader perspective of service quality regulation, especially in public utility industries. For empirical investigations of MQS see, e.g., Chitpy and Witte (1997) and Hotz and Xiao (2005). Applied theoretical work on MQS includes Boom (1995) and Bonroy (2003).…”

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confidence: 99%

A dynamic perspective on minimum quality standards under Cournot competition

Napel

Oldehaver

2011

J Regul Econ

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Imposing a minimum quality standard (MQS) is conventionally regarded as harmful if firms compete in quantities. This, however, ignores its possible dynamic effects. We show that an MQS can hinder collusion, resulting in dynamic welfare gains that reduce and may outweigh the static losses which are caused by regulation's distortive effect on equilibrium qualities. Verdicts on MQS thus depend even more on the market structure at hand than has been acknowledged. Terms of use: Documents inJEL Classification: L41; L51; L15; D43; Keywords: Minimal quality standard; Cournot competition; collusion * A previous version of this paper was titled "Static Costs vs. Dynamic Benefits of a Minimum Quality Standard under Cournot Competition." We are grateful to Dinko Dimitrov and, in particular, Cédric Argenton for helpful comments. We also benefitted from discussions with Michael Kuhn and participants of the EARIE2008 conference. The usual caveat applies.

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An Empirical Investigation of Firms' Responses to Minimum Standards Regulations

Cited by 30 publications

References 0 publications

The Impact of Regulations on the Supply and Quality of Care in Child Care Markets

The Impact of Regulations on the Supply and Quality of Care in Child Care Markets

Vertical product differentiation, minimum quality standards, and international trade

A dynamic perspective on minimum quality standards under Cournot competition

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