ESRI Discussion Paper Series No.83
Estimates of Price Elasticity of Child Care Demand and
the Amount of Potential Demand in Japan:
Evidence Based on a Contingent Valuation Method

December, 2003
Satoshi Shimizutani
(Economic and Social Research Institute, Cabinet Office)
Haruko Noguchi
(Visiting Fellow, Economic and Social Research Institute, Cabinet Office;
Toyo-Eiwa University)

The full text is written in Japanese.

(Abstract)

Japanese households in urban areas have suffered from a shortage of child care supply, especially for children age 0 to 2. Moreover, the bottleneck of child care is expected to grow more severe, due to a hike in demand for child care accompanied by an increase in female labor supply.

This study is meant to provide valuable information that should be incorporated into price policy that must deal with the bottleneck of child care demand by estimating the price elasticity of child care demand and the potential amount of demand and by applying welfare analysis. To address these issues, this study adopts a contingent valuation method (CVM) to a unique micro-level survey data on households with children under six collected in 2002.

Our empirical results show the following.
(1) Given the current child care payment (the average is 30,000 yen per month in our survey), the potential demand of child care is estimated to be 269,000 in Tokyo, Kanagawa, Saitama, and Chiba. This amount is many times larger than the official number of people on waiting lists (14,000), and suggests a large portion of excess demand.
(2) The estimated price elasticity is high at 2.0, which implies that price policy works to control excess demand. The estimated equilibrium price to clear the market is about 42,000 yen, or 40 percent larger than the average (30,000 yen).
(3) The estimated amount of consumer surplus is 114 billion yen per year in the four prefectures, which is overwhelmed by that of dead weight loss, which is estimated to be 356 billion yen.
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