Understanding day care enrolment gaps

We document day care enrolment gaps by family background in a country with a universal day care system (Germany). Research demonstrates that children of less educated or foreign-born parents can benefit the most from day care, making it important to understand why such enrolment gaps exist. Using a unique data set that records both stated demand and actual usage of day care we demonstrate that differences in demand cannot fully explain the enrolment gaps. Investigating supply-side factors using quasi-experimental designs, we find that reducing both parental fees and scarcity of places significantly decreases enrolment gaps by parental education but not by parental country of birth. We discuss implications for policy.