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Caring for Children and Firms? The Impact of Preschool Expansion on Firm Productivity

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  • Cali,Massimiliano
  • Johnson,Hillary C.
  • Perova,Elizaveta
  • Ryandiansyah,Nabil Rizky

Abstract

Childcare services enable women who were previously unable to work due to taking care of theirchildren to join the labor market. If some women are more productive in market work, rather than unpaid householdwork, the availability of childcare can potentially improve the allocation of talent across different occupations,triggering an increase in productivity. This paper tests this hypothesis using a survey of manufacturing plants anddata on preschool expansion in Indonesia. The analysisrelies on a triple difference estimation comparing plants in sectors with different degrees of female labor at baseline.The results suggest that between 2002 and 2014, when a rapid preschool expansion took place in Indonesia, an additionalpreschool per 1,000 children increased the total factor productivity of manufacturing plants by 11 percent forplants with an average fraction of female workers. The paper provides suggestive evidence that these effects were drivenby better labor market matching, enabled by the expansion of female labor supply, and greater job stability for femaleemployees. The results unveil a novel short-term economic impact of childcare services, which complements thelong-term growth impact through human capital accumulation.

Suggested Citation

  • Cali,Massimiliano & Johnson,Hillary C. & Perova,Elizaveta & Ryandiansyah,Nabil Rizky, 2022. "Caring for Children and Firms? The Impact of Preschool Expansion on Firm Productivity," Policy Research Working Paper Series 10193, The World Bank.
    • Handle: RePEc:wbk:wbrwps:10193
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    References listed on IDEAS

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