# **C.2 Definitions of Specific Variables**

## **C.2.1 Child Care Modes**

As described in Section 2, we assume that parents can choose one of three child care modes in addition to exclusive parental care: child care centers, non-relative care, and relative care. ECLS-B defines these three modes of care in the following way. They assign to _child care providers_ children whose parents report that the main form of care on a regular basis is “child care centers” [..] “Such centers include early learning centers, nursery schools, and preschools.” They assign to _non-relative care_ children whose parents report that the main form of care on a regular basis is “someone not related to” the child. [..] “This includes home child care providers, regular sitters.” They assign to _relative care_ children whose parents parents report that the main form of care on a regular basis is “a relative other than a parent [..], for example, grandparents”. In addition to the main form of care used on a regular basis, ECLS-B also collects form of care used on an irregular basis, for example a sitter for the night. We ignore non-parental form of care used on an irregular basis.

## **C.2.2 Locations**

We assign every household to one of four locations. We define locations using 2000 Census county data on population and income. Given our focus on child care markets, we consider as the relevant population the _number of children younger than 5_ in the county. Given our focus on household decisions, we consider as relevant income the _median family income_ . We build the assignment as follows. Given each household’s county of residence, we sort households by county population and calculate their median county population (36,150 children). Households below the median are assigned to Locations 1 and 2 (small locations) and those above are assigned to Locations 3 and 4 (large locations). We then sort households in Locations 1 and 2 by county median family income, the median of which is ($47,150), and assign them to Location 1 or 2 if they are below or above $47,150, respectively. For households in Locations 3 and 4, the corresponding threshold is $53,950; we assign them to Location 3 or 4 if they are below or above the median, respectively. As a result, locations 1 through 4 are defined as low population, low income; low population, high income; high population, low income; and high population, high income. By construction, locations have roughly the same number of households. In equilibrium computation, however, a household represents a different number of simulated households depending on its location so that the number of simulated households does indeed vary across locations (see further details in Appendix B).

Table C.2 presents descriptive statistics by location and, for comparison, for the aggregate. Households in high-income locations have lower rates of single motherhood and higher parental education. Consistent with more educated parents, these locations exhibit higher parental wages and child cognitive development. In all locations, home-based care is the most common choice and non-relative care is the least common. The second most-common choice is center-based care (for about 30 percent of children) except in the high-population, lowincome location where center-based and relative care are used in similar proportions. Prices for center-based care are higher in high- than low-income locations. Finally, households in low-population locations use less non-relative care than others.

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