Investing Early: The Effects of Dutch Childcare Subsidies on ECEC Intensity and Child Development

Abstract

This thesis investigates whether early-life financial incentives, in the form of childcare subsidy generosity at 5 months, influence the intensity of Early Childhood Education and Care (ECEC) use and child development outcomes in the Netherlands. Using data from the YOUth cohort between 2016 and 2023, the analysis focuses on standardized measures of language, socioemotional, and behavioral development at age 3. The research adopts a reduced-form empirical strategy that exploits variation in hourly childcare subsidies across time and income levels to estimate intention-to-treat effects. Results show that a €1 increase in hourly subsidy at 5 months raises the likelihood of attending formal childcare more than two days per week by 38–41 percentage points, and by 43.9 percentage points among children already enrolled in care. However, the estimated average effects on developmental outcomes are small and statistically insignificant across all domains. Notably, children with a migration background show significant language gains, with increases of 0.58 and 0.37 standard deviations in pragmatic use and reactivity, respectively. These findings suggest that while early subsidies are effective in increasing participation, they are not sufficient to generate broad developmental gains. The absence of average effects points to a disconnect between access and impact, highlighting that developmental returns depend not only on the availability of care but also on its quality, intensity, and the characteristics of the home environment it replaces.