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Supply side: concentration

The introduction of market forces in the Dutch child care sector. Annmarie Marangos en Janneke Plantenga J.Plantenga@econ.uu.nl.

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Supply side: concentration

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  1. The introduction of market forces in the Dutch child care sector. Annmarie Marangos en Janneke PlantengaJ.Plantenga@econ.uu.nl

  2. Introduction of the Child Care Act by 1 January 2005 - tripartite financial structure - demand driven; key role for parents Presumed effects: increase in internal and external efficiencyHow about the exit and voice options of parents?

  3. The market of child care; developments 1995-2005 Thesupply of child care services-concentration; - entry barriers; - prices; - diversity.The demand for child care services -information; - alternatives.

  4. Supply side: concentration Table 1. Child care suppliers, number of locations and child care places Source: CBS (Statistiek kindercentra (1995-2000); Statistiek welzijnswerk en kinderopvang (2001-2003)

  5. Supply side: entry barriers Newcomers play a modest role in the market for child care Between March 2001 and April 2003 circa 4500 child places were realised by new suppliers, while in this period the total supply increased with almost 40.000 child places.

  6. Supply side: prices Table 2: Hourly prices in the child care sector. Source: Deloitte, 2003, 2004, 2005

  7. supply side: diversityLittle information on supply of additional servicesLengthened opening hours: 10% of market Flexible care: 3% of market 24 hours care: 0.2% of market No clear trend

  8. In summary: - Clear trend towards centralisation - Analysis of the growth indicates that the market is not very accessible market - The prices have increased but seem rather stable by now - No clear trend towards innovative products.

  9. Demand side: informationA real risk that parents overestimate the qualityLittle knowledge of costs nor actual pricesIn 2004, around 50% of the parents knew the sum they have to pay monthly for the formal childcare by child. A quarter only knows the total sum; they could not subdivide the costs to each child. More than 14% has no idea.

  10. Demand side: available alternatives Tabel 3. Choices of parents with children in the age category 0-12: number of facilities available within 10 minutes, 2005. Source: SEO 2005.

  11. Demand side: available alternatives Table 4. Number of choices within the same child care form, according to parents Source: SEO, 2005: monitor kinderopvang Deloitte & Touche, bewerking SEO/UU

  12. Demand side: high switching costs? Table 5. When would you consider switching to an alternative supplier? (n=838) Source: SEO 2005.

  13. High switching costs due to loyalty Loyalty in the child care market is important because: - the service is provided for parents as well as for children; - the relationship between demander and supplier is personal; - the relationship is long term, but temporaryLoyalty weakens exit and strengthens voice

  14. Added value of the introduction of market forces? - More uniformity- Consumers provide information on actual needThe introduction of demand financing not only serves the interest of parents, but also solves the information problem of the government. The citizen hás to choose, because only thennecessary information becomes available.

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