제목 : Competition and Closure: The Impact of New Public Childcare Centers on Non-Public Providers in Seoul


저자 : Jun Yeong Lee, Seung Jin Cho


Abstract:
This study investigates the impact of newly established public childcare centers on the closure of existing childcare centers in Seoul, South Korea, from 2016 to 2023. Utilizing geographic coordinates, we identify the introduction of public childcare centers within a 500-meter radius of existing providers and employ a two-way fixed-effects (TWFE) regression model to assess their effects. Our findings reveal a significant increase in the closure rate of non-public childcare centers when a new public facility enters the vicinity. This impact is particularly pronounced in areas with lower initial competition, suggesting that non-public centers in such regions are more vulnerable to market shifts. By contrast, public childcare centers remain largely unaffected by the entry of additional public providers, maintaining stable closure rates regardless of competition levels. The results highlight the competitive pressures introduced by public sector expansion and the resulting crowding-out effect on non-public providers. This has important policy implications, as the government’s efforts to expand childcare availability may inadvertently reduce service diversity by displacing private and non-public providers. Given the potential inefficiencies and unintended consequences, targeted support mechanisms―such as subsidies for facility upgrades or operational incentives―could help sustain the viability of non-public childcare centers while still achieving the government’s x-objectives. Our study contributes to the broader literature on public sector expansion and market competition, offering insights into the dynamic effects of policy-driven investments in childcare infrastructure.
Keywords: Childcare, Public childcare, Crowding-out effect, South Korea