Childcare Choice and Long-Run Human Capital Outcomes in China

This paper estimates the long-run human capital effects of two types of care a child received before age 6: informal childcare provided by grandparents, and formal childcare by kindergarten, for those who were born between 1950 and 1995 in China. To correct for the endogeneity of childcare choice, I adopt the instrumental variables strategy: The survival status of paternal grandparents when a child was before age 6 is used to construct instruments for informal care; The existence of kindergarten in the community is used as an instrument for formal care. I find that both types of childcare lead to higher educational attainment and better job outcomes. Moreover, the effect of grand-parental childcare is stronger for girls, consistent with the parental preference for boys. I also find evidence that the kindergarten effect on human capital accumulation is caused by increased maternal labor income and decreased family size. Those findings highlight the important role of grandparents and public childcare for children in under-developed areas.