This study treats childcare center closures as an exogenous negative shock to local childcare infrastructure and examines how this shock affects the household income trajectories of families with young children in South Korea. In much of the urban pla...
This study treats childcare center closures as an exogenous negative shock to local childcare infrastructure and examines how this shock affects the household income trajectories of families with young children in South Korea. In much of the urban planning literature, childcare facilities have been discussed less as core infrastructure than as auxiliary welfare services—unlike schools or parks—and have rarely been analyzed as a spatial factor shaping household economic outcomes. Moreover, despite the rapid increase in closures under sustained low fertility, there is limited evidence that tracks the same households before and after closures while jointly considering their residential responses. To address this gap, the study tests whether moving after a closure helps households buffer income losses and whether relocating to areas with better childcare environments supports income recovery.
A nationwide administrative panel is constructed for 2015–2023 covering approximately 350,000 households whose first child was born between 2016 and 2018. Annual household income is derived by linking Statistics Korea’s child-and-household register with employment-based earnings records. These data are merged with childcare administration records at the eup–myeon–dong level, the smallest local administrative unit in South Korea, including the number of childcare centers, closure occurrence, capacity utilization, remaining slots, closure rates, the share of public centers, teacher resources, and classroom space. To capture the overall childcare environment and measure improvements after relocation, a Childcare Composite Index is constructed using rank-sum weighting from a multi-criteria decision-making framework.
The empirical analysis proceeds in three steps. First, a two-way fixed-effects difference-in-differences (DiD) specification in an event-study framework is estimated to recover dynamic income effects around closures and to assess pre-trends. Second, a difference-in-difference-in-differences (DDD) design combining closure exposure, post-closure periods, and residential mobility is used to test whether moving after a closure changes income trajectories. Third, focusing on movers observed in the destination area for at least two years, the DDD design further distinguishes moves that improve the childcare environment based on the composite index.
Three findings stand out. Pre-treatment estimates are not statistically different from zero, supporting the parallel-trends assumption. The income impact of closures does not appear immediately in the closure year; instead, it emerges with a delay. In particular, when closures occur while the first child is aged 0–1, household income declines significantly about two years later. Residential mobility after a closure does not, on average, generate a statistically significant differential income trajectory relative to non-movers, suggesting that mobility alone is not a general income-buffering mechanism. However, when mobility is evaluated by whether it improves the childcare environment, evidence appears in a specific timing window: households exposed to closures when the child is age 0 that relocate to better childcare areas when the child is age 2–3 show an additional post-period increase in income growth. This implies that the key margin is not relocation per se, but whether relocation results in meaningful improvement in childcare conditions.
These findings suggest that childcare center closures are not simply a routine adjustment in service supply, but a contraction of social infrastructure that can shape families’ labor supply and income trajectories. This underscores the need for proactive monitoring of high-risk areas and stronger response systems to prevent childcare service gaps. It also points to the importance of explicitly incorporating local childcare conditions into housing policy and urban planning as a core component of social infrastructure. Finally, given unequal capacity to adjust through relocation, policy efforts should combine targeted support for vulnerable families in closure-affected areas with housing measures that improve access to better childcare environments.