Theory and Evidence. Childcare is a sector that is heavily regulated because of the importance of ensuring child safety. The current price of childcare is $1200 a month. The government is concerned with this market: Evidence shows that young parents are not returning to work because they cannot afford childcare. The government conducts a randomized control trial of a new policy. In some randomly selected cities, the government mandates that childcare providers cannot charge more than $800 per month. Other randomly selected cities are left unaffected to serve as a control. In six months, the outcomes show that the number of children getting childcare has not changed, but that waiting lists for childcare have increased dramatically. (a) Can this outcome be reconciled with the theory of supply and demand? (b) Do you expect that outcomes will improve in the long run?

Theory and Evidence. Childcare is a sector that is heavily regulated because of the importance of ensuring child safety. The current price of childcare is $1200 a month. The government is concerned with this market: Evidence shows that young parents are not returning to work because they cannot afford childcare. The government conducts a randomized control trial of a new policy. In some randomly selected cities, the government mandates that childcare providers cannot charge more than $800 per month. Other randomly selected cities are left unaffected to serve as a control. In six months, the outcomes show that the number of children getting childcare has not changed, but that waiting lists for childcare have increased dramatically. (a) Can this outcome be reconciled with the theory of supply and demand? (b) Do you expect that outcomes will improve in the long run?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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