Early childhood education and care: effects after half a century and their mechanisms

The effects of early childhood education and care (ECEC) have been widely researched, but most studies focus on targeted or relatively short-term programmes. This paper investigates the long-term effects of a universal ECEC programme and underlying mechanisms. By exploiting differences in expansion rates of childcare institutions across Japan from the 1960s to the 1980s, I find a positive effect of ECEC on income at up to age 50. The overall effect is driven by a significant impact among women, who were disadvantaged at that time, while there are no adverse effects on others. Mediation analysis shows that an increase in wages leads to an increase in income, which is triggered by improved educational attainment and not an increase in labour supply. The results imply that a universal childcare system has the potential to reduce income inequality.