Programa Urbano was a public childcare program for children ages 0–4 in poor urban areas in Nicaragua. The program, which started in 2014, was a large-scale effort by the Nicaraguan government to increase the availability and quality of childcare centers, targeting urban families living in extreme poverty. The program randomly assigned childcare centers to neighborhoods. The centers provided childcare for half a day, 5 days a week over 13 months and followed a defined curriculum with daily objectives for cognitive, language and socio-emotional development. Meals were also provided to children. Student to teacher ratios ranged from 1:8 for children 0-2 years old and 1:18 for children 3-4 years old.

Hojman and Boo (2022) evaluate the impact of Programa Urbano on both child development and maternal labor supply. The paper exploits the neighborhood-level randomization of the program to study the impacts of childcare availability. The main findings of the paper are that the program had a positive impact of 0.38 standard deviations on socio-emotional skills of children and a 12-percentage-point increase on mothers’ labor supply.

The paper uses these results to estimate the MVPF of this public childcare program.

MVPF = 66.0

The paper estimates net costs for two groups of beneficiaries: compliers and always-takers. Compliers are those who participate in the childcare program only if assigned to the treatment group (that is, individuals who would not have participated in childcare if not for the program). Always-takers are those who would participate in a childcare program regardless of the program.

The paper estimates two direct cost components for compliers. First, they calculate routine program expenses at approximately US$92 per child annually. To estimate the total program cost, they divide this amount by the number of centers to determine the average cost per center. They then factor in the empirical occupancy rate per center to arrive at a per-child cost, which they estimate to be $92. Second, infrastructure costs are imputed as US$55 per child per year. When combined, the total cost of the program for compliers was US$92 + US$55 = US$147 per child per year (US$159 for 13 months).

The paper assumes a program cost of zero for always-takers because when they move to a new childcare center that opened as a result of Programa Urbano, they open a slot in their old center. In other words, the paper assumes the effect of the program on always-takers is to shift them from a center that is farther away to a closer center.

As compliers are 46% of the sample population and the estimated program cost for always-takers is zero, the average direct cost of the program is US$159 x 46% = US$73.

The paper also estimates two revenue externalities associated with the compliers. First, the paper calculates US$31 of higher income tax revenues from increased maternal earnings. The paper found that mothers were 12% more likely to work because of the program. Assuming minimum wage level of US$1,618 a year and adjusting for the length of the program, compliers generate 12% x US$1,618 x 15% tax rate x 13 months/12 months = US$31 of revenue externalities.

Second, the paper estimates that the increase in tax revenues from higher lifetime earnings for children due to improved socio-emotional skills is US$117. The paper finds that the program improves socio-emotional skills among children by 0.38 standard deviations. Utilizing results from Lindqvist and Vestman (2011), the paper estimates that a one standard deviation increase in noncognitive skills could have an impact of 7.4 percent on log wages, suggesting the program increase of 0.38 standard deviations could lead to an increase in increase lifetime earnings of 2.8 percent. Assuming the children earn minimum wage, the program’s impact on children’s lifetime earnings amounts to US$783 in present value, yielding tax revenue of approximately 15 percent tax rate x US$783 = US$117.

Together, the total fiscal externality is (US$31 + US$117) x 46% = US$69 once adjusting for the share of compliers in the population.

Thus, the net cost is program per child is US$159 – (US$31 + US$117) x 46% = US$5.

(\frac{ATR^1}{1-ATR^0})(\frac{ATR^1}{1-ATR^0})

$5.0
Net Cost

Upper Margin
Lower Margin

The paper reports willingness to pay estimates for both the compliers and the always-takers.

For compliers: Children with higher lifetime earnings increase their consumption by their earnings net of taxes. This yields a willingness to pay of US$783 x 85%= US$665. Changes in maternal earnings are not considered as a result of the envelope theorem.

For always-takers: For some families, Program Urbano offered childcare with marginally smaller commuting times. The paper estimates that this reduction in commuting time implies a time saving that is valued by the families at roughly US$109 for the 13 months.

Compliers represented 46% of the sample and always-takers represented 23% of the sample. Thus, the average willingness to pay for the sample population is (US$6650.46) + (US$1090.23) = US$331.

$331.0
WTP

Upper Margin
Lower Margin

The MVPF is then the ratio of the willingness to pay to the net cost: US$331/US$5 = 66 (which is reported in the paper as “around 70”).

The paper reports a few other MVPF values under different assumptions:

- If they consider the actual interest rate paid by the program (1.2 percent), the MVPF becomes infinity.
- If they consider a more conservative interest rate of 5 percent, the MVPF goes down to 6.8.
- If they assume mothers and children earn 50% more than minimum wage, the MVPF becomes infinity.
- If they increase the interest rate to 5 percent and increase wages to 50% more than minimum wage, the MVPF is 46.

66.0
MVPF

Upper Margin
Lower Margin

Hojman, A., & Boo, F. L. (2022). Public childcare benefits children and mothers: Evidence from a nationwide experiment in a developing country. Journal of Public Economics, 212, 104686. https://doi.org/10.1016/j.jpubeco.2022.104686

- Category
- Education
- Sub-Category
- Child Education
- Beneficiary Type(s)
- Children under five
- Country of Implementation
- Nicaragua
- Year of Implementation
- 2014
- Empirical Method
- RCT
- Research Type
- Primary
- Peer Reviewed
- Yes
- MVPF Publication Link
- www.sciencedirect.com/science/article/pii/S0047272722000883