Public financing and subsidization of child care can allow for more equitable access to child care in places where public provision and capacity are low. The mechanisms of the delivery of the subsidy matter, however, in terms of who gets the benefits of the subsidy and overall cost effectiveness, given the initial conditions in the child care market. This paper sets out an ex ante simulation model using a supply side provider level and demand side household model and combining the two models for estimating the benefit incidence of expanded capacity and enrolments as a result of the child care subsidies, looking at different mechanisms of the delivery including investment grants to providers, operational monthly grants to child care providers, combinations of the investment and operational grants and demand side vouchers to households. The model is applied to empirical data from child care centres and households in Turkey and results reveal that the choice of the subsidy delivery model is not trivial, and has a strong bearing on both the benefit incidence and cost effectiveness of the subsidy. In the case of Turkey, where significant supply side constraints exist in the market, a demand side voucher system is shown to be the least cost effectiveness measure of delivery of the subsidy, and while a demand-side voucher can be pro-poor targeted, it is not necessarily the option that reveals the most “pro-poor results” both in terms of newly generated capacity and the impact of the subsidy on household welfare. The simulation model developed here can be applied in other country contexts, with the only data requirements being micro data on costs and pricing structure of child care providers as well as household data with variables on household welfare and child care utilization.

1. Building an Ex-Ante Simulation Model
for Estimating Capacity Impact, Benefit
Incidence and Cost Effectiveness of
Child Care Subsidies:
An application using provider-level data from Turkey
Meltem Aran
Ana Maria Munoz Boudet
Nazli Aktakke
Nov 3, 2016
Presentation at Harvard University
John F. Kennedy School of Government

2. Outline
01
02
03
Background on Childcare in Turkey
Scenarios and Policy Options
Findings04
The Model

3. Previous work on child care in Turkey
The bank’s engagement and analytical work on child care, gender and female labor force
participation dated back to 2009..
3
2009
Life Chances in Turkey
Expanding Opportunies for
the Next Generation
2010
Recent Trends in Female
Labor Force Participation
2014
Can Child care Vouchers get
Turkish mothers back to
work?
2015
Supply and Demand for Child
Care Services in Turkey

4. In Turkey pre-primary enrolment ratio
is low given GDP per capita
Source: World Bank 2015, Supply and Demand for Child Care Services in Turkey.
(Graph is drawn using data from 2012)
Pre-primary enrolment
rate, gross
Turkey: 38.6 % (2015)
OECD: 82.5 % (2013)
EU: 93.9 % (2013)

5. Children from disadvantaged backgrounds are
less likely to benefit from centre based child
care services
Enrolment rate in centre based child care for the age group 3-5 (%),
By quintiles of per capita household income, 2012
17 16.7 17.8 22.1 27.5
1.2 2.3 3.7
10.1
27.6
0
20
40
60
80
100
1 (En yoksul) 2 3 4 5 (En zengin)
Source: Turkey Income and Living Conditions Survey 2012, authors calculations
(Poorest) (Richest)
Kindergarten
Mostly pubic
provision
Child Care or Preschool
Mostly private
provision

6. 6
Low capacity of child care – capacity needs vary
by province
Source: World Bank 2015, Supply and Demand for Child Care Services in
Turkey
A total of 58,380 facilities are
needed to be built to reach
100% enrolment rate

7. Enrolment in private child care centres is low
Compared to the Latin American countries, Arab states, the OECD, or the EU countries,
children enrolled in private institutions remain low in Turkey
Percentage of enrolment in pre-primary education in private institutions (%)
Source: World Bank, World Development Indicators
11.6
46.5
37.0
30.5
24.5
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Percentageofenrolmentinpre-primary
educationinprivateinstitutions(%)
Turkey Arab states EU OECD countries World Latin America and Caribbean

8. 1.01
0.92
0.84
0.740.730.71 0.7 0.7 0.7 0.68
0.620.610.590.58
0.52 0.5 0.49
0.460.450.45
0.410.41 0.4 0.4 0.4
0.350.330.32
0.190.18
0.1
0.04
0.52
0
0.2
0.4
0.6
0.8
1
1.2
Totalpublicexpenditureonpre-primaryeducation(ISCED0)asa
percentageofGDP,2010
Also not surprisingly, public expenditure on pre-primary education
as a share of GDP is very low in Turkey compared
to the EU countries
Total public expenditure on pre-primary education as a percentage of GDP, 2010
Source: Eurydice and Eurostat Report 2014

9. Purely demand side subsidy to households
Demand side subsidy to formally working
women using child care: highly regressive• Two prominent Turkish NGOs (ACEV
and KAGIDER) advocated for a
demand side transfer to formally
employed mothers 300 TL per month
(back in 2009).
• A purely demand side subsidy to formally
working mothers would have been highly
regressive.
• If targeting poorer women – not cost
effective in terms of activation.
• Targeting employable – middle income
women in urban areas would have
worked – but still not cost effective in
terms of generating supply of services
and increasing enrolments.

10. Questions going into the Child Care study
The pieces of the puzzles when we started supply and demand side data collection
10
Is there an “unmet demand” for
child care – or is low utilization a
function of social
norms/unwillingness of households
to use child care?
Why is Utilization Low?
Norms or capacity
constraints?
Barriers to entry?
Why does the market not clear?
Why is private
investment low?
What are households’
expectations of child care in terms
of quality standards? What is their
willingness to pay for these
services?
Willingness to Pay
What models can work for
improving access to poor/middle
class households? What are some of
the current constraints that impede
the development of such models?
What form (if any)
should subsidies take?

11. Most Binding Standards
Infrastructure (particularly garden) requirements are reported as most
difficult standards to comply with by MONE accredited private providers
7.2
8.6
10.5
12.5
13.8
13.8
14.5
14.5
15.8
16.4
16.4
18.4
23.0
31.6
39.5
43.4
0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0
In nursery classes under primary schools: teachers and administrative staff with university
degree
Teacher : four-years university degree in preschool education, child development
departments, vocational high school degree in child development plus university degree…
The curriculum provided by MoNE can be applied for both 0-36 month- and 36-66 month-
old children
Painting must be done with materials easy to be cleaned
Total area covered by windows in a classroom
In pre-schools: All teaching and managerial staff with university degree
1 director room (min. 10 m2)
1 play room (min. 15 m2)
In pre-schools: support staff, cook, furnaceman, driver, technician and security staff with
high school degree
Certificate from relevant public authorities indicating preparedness to fire
Director: four-years-university degree in educational sciences
Floor covered with a not harmful material for the health of children
Min. 1,5 m2 per child in the classroom
Floor covered with a material easy to be cleaned
The garden with a soft floor (with enough grass and soil min. 1,5 m2 per child for the
development motor and cognitive skills)
In a school building having garden or at the ground floor of a multi-floor building or at a
floor having connection with the ground floor
MoNE-Private
% of service providers that
report these specific standards
as being most difficult to follow.
Each provider was asked to
select 3 requirements from the
list.
11

12. Willingness to pay
Results from Demand Side Household Data set
12
0
100
200
300
400
500
600
700
willingnesstopay
Less than basic
education
Basic education
(8 yrs)
High school University or more
Education level of woman
0
100
200
300
400
500
600
700
willingnesstopay
<=300 300-600 >600
Income groups
Average willingness to pay increases with higher levels of education and higher household
income per capita
Source: Turkey Child Care Assessment Demand Side Dataset

13. Earnings difference is low
The difference between women’s potential (and actual) earnings and child care
costs is too low (or negative), oftentimes not making it worthwhile for women less
than university degrees to take up work….
13
Earnings diffference = Potential (or actual) earnings - Child
care costs
Median monthly full day price of private service providers 700 TL
Median monthly full day price of public service providers 300 TL
0
500
1000
1500
2000
2500
Less than basic education Basic education (8 yrs) High school University or more
Education level of women
Average current monthly income (for employed women)
Average predicted monthly income if participated in the labor force (for non-employed women)
Average willingness to pay
Median monthly full day price of private service providers, data coming from supply side
Median monthly full day price of public service providers, data coming from supply side
Source: Turkey Childcare Assessment Demand Side dataset
Earnings difference and willingness to pay for a kindergarten in the neighborhood

14. 14
Conclusions after Child Care Study
Many families find child care unavailable and
expensive – and have positive perceptions about
centre based care (after age 2.5).
Lack of supply and unmet demand
Willing to Pay
Quality expectations of families are more
about the content of the child care services
and about psychological needs and security
of the child while current standards focus
on infrastructure.
Mismatch in quality and binding regulations
Some willingness to pay but lower than current prices.
class and poor households. The earnings difference
work working mothers is low. Services need to be
subsidized in order to make them more accessible for
middle class and the poor.
What is the most cost effective form of subsidies?
How much should we provide in subsidies? Who
should we target?
Subsidies
Missing
piece

15. Costs, willingness to pay and subsidies
TL /
month
Welfare
indicator,
education
level, SES
Current
costs for
private
provision
Lower costs
for private
provision
Requires
subsidy
Can be reached
through lower cost
private provision +
subsidies
Currently able
to access
services
15

16. Policy scenarios
Scenario Name Description
SimpleScenarios
Scenario 1 Supply Side Investment Grant only:
One-time investment grant to child care centres
Investment Grant: 50,000 TL given to the service provider one time for initial
investment.
Scenario 2A Supply Side Operational Grant only:
Monthly per student operational grant (no price cap)
Operational Grant: 300 TL per child per month given to the service provider for
5 years.
Scenario 2B Supply Side Operational Grant only with Price Cap:
Monthly per student operational grant (with price cap)
Operational Grant: 300 TL per child per month given to the service provider for
5 years.
Price cap: 750 TL (the service provider agrees to limit the maximum price to
750 TL per child per month under this contract for the duration of the subsidy)
Scenario 3 Demand Side Grant only:
Vouchers to households per child enrolled
Voucher to Household: 300 TL per child per month, targeting households in
bottom 40% of income percentile.
CombinationScenarios
Scenario 4A Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant
combined (no price cap)
Investment Grant: 50,000 TL given to the service provider one time for initial
investment.
+
Operational Grant: 300 TL per child per month given to the service provider for
5 years.
Scenario 4B Supply Side Investment and Operational Grant combined with
Price Cap:
One-time investment grant and monthly per child operational grant
combined (with price cap)
Investment Grant: 50,000 TL given to the service provider one time for initial
investment.
+
Operational Grant: 300 TL per child per month given to the service provider for
5 years.
Price cap: 750 TL (the service provider agrees to limit the maximum price to
750 TL per child per month under this contract for the duration of the subsidy)
Scenario 5 Supply Side Investment Grant and Demand Side Grant combined:
One-time investment grant and monthly voucher to households
combined
Investment Grant: 50,000 TL given to the service provider one time for initial
investment.
+
Voucher to Household: 300 TL per child per month, targeting households in
bottom 40% of income percentile.

17. (+) Investment
grant
 Increase in the
number of enrolled
through increase in
capacity
Government
Families
Childcare
Providers
Scenario1:
Investment Grant
Capacity impact only

18. (+) Operational grant
 Increase in the
number of enrolled
through increase in
affordability
Government
Families
Childcare
Providers
Scenario 2:
Operational Grant
Scenario 2A: With price cap
Scenario 2B: Without price cap
Capacity and affordability impact

19. (+) Voucher
 Increase in the
number of enrolled
through increase in
affordability
Government
FamiliesChildcare
Providers
Scenario 3:
Voucher
Affordability impact only

20. (+) Investment
grant
(+) Operational
grant
 Increase in the
number of enrolled
through increase in
capacity
 Increase in the
number of enrolled
through increase in
affordability
Government
FamiliesChildcare
Providers
Scenario 4:
Investment +
Operational Grant
Scenario 4A: With price cap
Scenario 4B: Without price cap
Capacity and affordability impact

21. (+) Investment
grant (+) Voucher
 Increase in the
number of enrolled
through increase in
capacity
Government
FamiliesChildcare
Providers
Scenario 5:
Investment +
Voucher
Capacity and affordability impact

22. What We Can Estimate
Using the simulation model
22
Capacity
Impact on capacity
and estimated
number of new
centres
Enrolments
Impact on pre-school
enrolments (coming from new
capacity and increased
affordability)
Total CostBenefit Incidence
Benefit incidence of new
enrolments and grants
Cost Effectiveness
Total Revenue Net cost

23. The Model
STEP 1
Supply Side model
STEP 2
Demand Side Model
STEP 3
Simultaneous calculation that takes into
account changes in enrolment as a result of
capacity increase and affordability increase

24. Supply side simulation
Data
• Supply side data was in 2014 for the World
Bank study “Supply and Demand for Child
care Services in Turkey” (World Bank, 2015)
• Data was collected from 603 centre-based
child care providers in 5 provinces in Turkey
(Istanbul, Gaziantep, Denizli, Eskişehir and
Samsun)
• For the simulation model we make use of a
sample of private providers in the dataset
making up a total of 226 providers
• The dataset includes a wide range of
information on child care centres such as
their set-up and operational costs and the
prices they charge per child
Methodology
• Our main assumption is that the centres in the dataset are
potential investors. The data come from the empirical data
set, but are treated in the model as hypothetical cases (as
if investments in these centres have not yet been made)
• Our aim is to calculate an investment probability for the
centres with and without subsidies
• In order to do this we use information from the dataset:
• Price per child
• Setup cost of the centre if it were to be opened up today
• Monthly variable costs: personnel costs, stationary costs,
utility costs and travel costs
• Total number of children enrolled in the centre
and calculate the net present value (NPV) of the centre for a
period of 10 years
• Secondly, the NPV of an investment is mapped onto a
probability of investment through a functional form

25. Supply side simulation
The Model
(+) Price per child
Net Present
Value
Probability to
invest
(-) setup cost of the
centre if the centre were
to be opened up today
(-) Monthly variable
costs
Net Present Value
= − Setup Cost +
𝑡=1
10
𝑃𝑟𝑖𝑐𝑒 𝑝𝑒𝑟 𝑐ℎ𝑖𝑙𝑑 ∗ 𝐸𝑛𝑟𝑜𝑙𝑚𝑒𝑛𝑡
−𝑇𝑜𝑡𝑎𝑙 𝑚𝑜𝑛𝑡ℎ𝑙𝑦 𝑣𝑎𝑟𝑖𝑎𝑏𝑙𝑒 𝑐𝑜𝑠𝑡𝑠
∗ 12 ∗ (1 − 𝑡𝑎𝑥)
1 + 𝑟 𝑡
+ Terminal Value
(+) Investment
grant
(+) Operational grant * Pass through
Net Present Value (TL)
Probabilitytoinvest

26. Supply side simulation
Calculating the Estimated Capacity Increase Impact of the
Grants
• E(Capacity)Baseline = Probability to invest in Baseline*Total capacity of the centre
• E(Capacity)Sc X = Probability to invest in Sc. X*Total capacity of the centre
These expected capacities are then summed up and the percent capacity increase achieved with Sc.
X is calculated with the following equation:
• % Increase in total capacitySc X = (E(Total capacity)Sc X-E(Total capacity)Baseline)/ E(Total
capacity)Baseline

27. Example
Centre A in the baseline
• Setup cost of the centre if the centre were to be opened up today: 171,000 TL
• Monthly variable costs: 21,000 TL
• Price per child: 910 TL
• Total number of children enrolled: 51
Net Present Value = −171,000 + 𝑡=1
10 910∗51 −21000 ∗12(1−𝑡𝑎𝑥)
(1+𝑟) 𝑡 +𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑣𝑎𝑙𝑢𝑒
Net Present Value= 399,173
Probability to invest = %26.73
Note: r = 0.40, EBITDA Multiple = 10.5, tax=0.32.

28. Example –
Centre A receives an investment grant
Centre A recei
• If it were to receive 50,000 TL worth of investment grant
𝑁𝑒𝑡 𝑃𝑟𝑒𝑠𝑒𝑛𝑡 𝑉𝑎𝑙𝑢𝑒 = −171,000 + 𝟓𝟎, 𝟎𝟎𝟎 + 𝑡=1
10 910∗51 −21000 ∗12(1−𝑡𝑎𝑥)
(1+𝑟) 𝑡 + 𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑣𝑎𝑙𝑢𝑒
Net Present Value = 449,173
Probability to invest = %37.56
Newly created capacity = (%37.56 - %26.73) x 51 = 5.52 children

29. Example –
Centre A receives an operational grant
Centre A
• If it were to receive 500 TL operational grant (for 5 years)
Net Present Value = −171,000 + 𝑡=1
5
910+ 𝟓𝟎𝟎∗𝟎.𝟓 ∗51 −21000 ∗12(1−𝑡𝑎𝑥)
(1+𝑟) 𝑡
+ 𝑡=6
10 910∗51 −21000 ∗12(1−𝑡𝑎𝑥)
(1+𝑟) 𝑡 + 𝑇𝑒𝑟𝑚𝑖𝑛𝑎𝑙 𝑣𝑎𝑙𝑢𝑒
Net Present Value = 610,911
Probability to invest = %75.20
Newly created capacity = (%75.2 - %26.73) x 51 = 24.7 children
Existing
capacity

30. Demand side simulation
• We make use of Turkey EU-SILC (Survey of
Income and Living Conditions) 2012 dataset
which is representative for Turkey
• Dataset has information on a wide range of
issues related to the household such as
wealth, income, labour force participation of
the members
• Dataset includes information on 3-5 year old
children’s enrolment to centre-based child
care
• We only make use of the part of the dataset
collected from households located in urban
areas
Methodology
• The capacity increase found in the supply side simulation
is used as the “exogenous shock” in the demand side
simulations.
• The number of children aged 3-5 who are currently
enrolled in preschool or day care in the EU SILC 2012
dataset is multiplied with the estimated capacity increase
coming from the supply side simulation for each scenario.
• Once the new capacity is calculated, this value is divided
by the total number of children attending preschool in
Turkey in the baseline.
• Lastly, this value is used as the per cent capacity increase
and it is multiplied by the number of children attending
preschool in the dataset.
• After the capacity increase amounts in SILC are all
determined, the number of new spots due to the increased
capacity are allocated to the children in the dataset aged
3-5, based on their propensity to attend preschool.
Data

31. Demand side simulation
Example: Increase in capacity is %50
Children
benefitting from
pre-school
services
Children not
benefitting from
pre-school
services
Children who
will benefit
from the
capacity
increase
The propensity to attend preschool is
calculated using a probit model which uses a
wide range of independent variables to predict
a child’s propensity to attend preschool.
The probit equation is as follows:
P(pre-school or daycare)=φ(X’)
Independent variables are:
• child’s age,
• mother’s level of education,
• mother’s employment status,
• father’s level of education,
• father’s employment status,
• per capita household income,
• household size,
• number of adults in the household aged 65+,
• number of children in the household aged 0-6,
• region the household is located in
Impact of supply side grants on enrolment is through
capacity. Children who have the highest propensity to
enrol become enrolled.

32. Demand side simulation
Impact of vouchers
• The main impact of the vouchers is through the income effect
introduced by the voucher – hence the increased enrolment is
due to increased affordability
Independent variables are:
• child’s age,
• mother’s level of education,
• mother’s employment status,
• father’s level of education,
• father’s employment status,
• per capita household income,
• household size,
• number of adults in the household
aged 65+,
• number of children in the
household aged 0-6,
• region the household is located in
P1: Probability to
attend pre-schoolPro
b
(+) Voucher
P2: Recalculated probability to attend
pre-school
when there is a voucher creating a
positive income effect
Children
benefitting from
pre-school
services
Children not
benefitting from
pre-school
services
Children who
will benefit
from pre-
school
services
through
increased
affordability

33. Demand side simulation
Impact of vouchers
• The expected number of children attending preschool as a result of the affordability
increase is calculated using the equation below
E(Number of children enrolled due to affordability increaseSc X )= (P2-P1)*individual weight in the
dataset

34. Demand side simulation
Impact of the operational grants come both from the capacity and
affordability (income effect)
Independent variables are:
• child’s age,
• mother’s level of education,
• mother’s employment status,
• father’s level of education,
• father’s employment status,
• per capita household income,
• household size,
• number of adults in the household
aged 65+,
• number of children in the
household aged 0-6,
• region the household is located in
P1: Probability to
attend pre-school
when there is an
operational grant
and children are
allocated the new
capacity
Prob
(+) Operational
grant * Pass
through
P2: when there is an operational grant
and children are allocated the new
capacity and there is also the positive
income shock
Children benefitting
from pre-school
services
Children not
benefitting from pre-
school services
Children who
will benefit from
the capacity
increase
Children who
will benefit from
pre-school
services
because of an
affordability
increase

35. Demand side simulation
Impact of operational grants through increasing affordability and
capacity
• The expected number of children attending preschool as a result of the
affordability increases is calculated using the equation below
E(Number of children enrolled due to affordability increaseSc X )=
(P2-P1)*individual weight in the dataset
• The number of children enrolled due to capacity increase is also calculated
• Lastly these numbers are added together to have the overall effect:
Number of newly enrolled childrenSc X=Number of children enrolled due to the capacity
increaseSc X+ E(Number of children enrolled due to affordability increaseSc X)
Number of children enrolled due to the
capacity increaseSc X =
1
% 𝑐𝑎𝑝𝑎𝑐𝑖𝑡𝑦 𝑖𝑛𝑐𝑟𝑒𝑎𝑠𝑒 𝑖𝑛 𝑆𝑐 𝑋 ∗𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐𝑢𝑟𝑟𝑒𝑛𝑡𝑙𝑦 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛 𝑖𝑛 𝑡ℎ𝑒 𝑑𝑎𝑡𝑎𝑠𝑒𝑡
𝐼𝑛𝑑𝑖𝑣𝑖𝑑𝑢𝑎𝑙 𝑤𝑒𝑖𝑔ℎ𝑡

36. Costing
• Different calculations are necessary to calculate the cost of the investment,
operational grants and the vouchers:
1. For investment grants:
Total Cost = (Number of children enrolled due to the capacity
increase/Average capacity of a centre)*Investment grant
2. For the operational grant, when there is no price cap:
Total cost =
𝑡=1
5
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑
𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛 𝑖𝑛 𝑇𝑢𝑟𝑘𝑒𝑦 𝑎𝑓𝑡𝑒𝑟 𝑔𝑟𝑎𝑛𝑡
∗ 𝑝𝑒𝑟 𝑐ℎ𝑖𝑙𝑑 𝑔𝑟𝑎𝑛𝑡
∗ 12
1 + 𝑟 𝑡
3. For the operational grant with the price cap:
Total cost =
𝑡=1
5
(𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛 𝑎𝑙𝑟𝑒𝑎𝑑𝑦 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑
𝑖𝑛 𝑡ℎ𝑒 𝑏𝑜𝑡𝑡𝑜𝑚 80% +
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑛𝑒𝑤𝑙𝑦 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛)
∗ 𝑝𝑒𝑟 𝑐ℎ𝑖𝑙𝑑 𝑔𝑟𝑎𝑛𝑡
∗ 12
1 + 𝑟 𝑡
4. The cost of the vouchers:
Total cost =
𝑡=1
5
(𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛 𝑎𝑙𝑟𝑒𝑎𝑑𝑦 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑
𝑖𝑛 𝑡ℎ𝑒 𝑏𝑜𝑡𝑡𝑜𝑚 40% +
𝑁𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑛𝑒𝑤𝑙𝑦 𝑒𝑛𝑟𝑜𝑙𝑙𝑒𝑑 𝑐ℎ𝑖𝑙𝑑𝑟𝑒𝑛)
∗ 𝑝𝑒𝑟 𝑐ℎ𝑖𝑙𝑑 𝑣𝑜𝑢𝑐ℎ𝑒𝑟
∗ 12
1 + 𝑟 𝑡

37. Tax revenues
• Two kinds of tax revenue is calculated for each scenario. These are corporation tax revenues and
income tax revenues from newly employed staff at the centres
1. Tax revenues obtained from the newly opening centres: This is in the form of
income and corporation taxes making a cumulative total of 32% of the profits
2. Tax revenues obtained from employee contributions: This is composed of the
women working in child care centres that opened up as a result of the grants. Hence
as a lower bound estimate for tax revenue - all the women employed in new child
care centres are assumed to be receiving the minimum wage .
• Net present value of tax revenues are calculated for a period of 10 years.

38. Impact on Capacity
Capacity increase is maximized in the scenario that combines the investment grant
and the operational grant (and does not impose a price cap) (Sc. 4A).
38
Capacity Increase (%)Capacity Increase: Number of New Centres
783
3,306
2,394
0
4,132
3,339
783
0 1,000 2,000 3,000 4,000
Supply Side Investment Grant only: One-time investment
grant to child care centres.
Supply Side Operational Grant only: Monthly per student
operational grant (no price cap)
Supply Side Operational Grant only with Price Cap:
Monthly per student operational grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child
operational grant combined (no price cap)
Supply Side Investment and Operational Grant Combined
with Price Cap:
One-time investment grant and monthly per child…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to
households combined
Scenari
o1
Scenari
o2A
Scenari
o2B
Scenari
o3
Scenari
o4A
Scenari
o4B
Scenari
o5
6
24
17
0
30
24
6
0 5 10 15 20 25 30 35
Supply Side Investment Grant only: One-time
investment grant to child care centres.
Supply Side Operational Grant only: Monthly per
student operational grant (no price cap)
Supply Side Operational Grant only with Price Cap:
Monthly per student operational grant (with price
cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant
combined:
One-time investment grant and monthly per child…
Supply Side Investment and Operational Grant
Combined with Price Cap:
One-time investment grant and monthly per child…
Supply Side Investment Grant and Vouchers
Combined:
One-time investment grant and monthly voucher to…
Scenari
o1
Scenari
o2A
Scenari
o2B
Scenari
o3
Scenari
o4A
Scenari
o4B
Scenari
o5

39. Impact on Preschool enrolment
Number of newly enrolled children
39
Capacity
Number of newly
enrolled children due
to capacity increase
Affordability
Number of newly
enrolled children due
to affordability
increase
0 100,000 200,000 300,000 400,000 500,000
Supply Side Investment Grant only: One-time investment grant to child care
centres.
Supply Side Operational Grant only: Monthly per student operational grant (no
price cap)
Supply Side Operational Grant only with Price Cap: Monthly per student
operational grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant combined (no…
Supply Side Investment and Operational Grant Combined with Price Cap:
One-time investment grant and monthly per child operational grant combined…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households combined
Scen
ario
1
Scen
ario
2A
Scen
ario
2B
Scen
ario
3
Scen
ario
4A
Scen
ario
4B
Scen
ario
5
# of newly enrolled children due to capacity increase Total number of newly enrolled children

40. Impact on Enrolment Rate
Increase in Enrolment Rate (% points) for overall
population and for the poor
40
Enrolment rate
Increase I enrolment
rate (percentage
points)
Enrolment rate of poor(er) children
Increase in enrolment rate of
the poorest 40%
1.6
7.9
5.7
0.9
9.6
7.6
2.6
0.0
4.1
3.6
1.9
6.0
6.2
2.1
0 1 2 3 4 5 6 7 8 9 10
Supply Side Investment Grant only: One-time investment grant to child care
centres.
Supply Side Operational Grant only: Monthly per student operational grant
(no price cap)
Supply Side Operational Grant only with Price Cap: Monthly per student
operational grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant…
Supply Side Investment and Operational Grant Combined with Price Cap:
One-time investment grant and monthly per child operational grant…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households combined
Scena
rio1
Scena
rio2A
Scena
rio2B
Scena
rio3
Scena
rio4A
Scena
rio4B
Scena
rio5

41. Benefit Incidence
Benefits to the bottom 40% of population (%)
41
% of the newly enrolled
children from bottom 40%
% of the benefit going to
bottom 40%
0
25
31
100
30
40
39
0
29
41
100
30
43
100
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
Supply Side Investment Grant only: One-time investment grant to child care
centres.
Supply Side Operational Grant only: Monthly per student operational grant (no
price cap)
Supply Side Operational Grant only with Price Cap: Monthly per student
operational grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant combined (no…
Supply Side Investment and Operational Grant Combined with Price Cap:
One-time investment grant and monthly per child operational grant combined…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households combined
Scenar
io1
Scenar
io2A
Scenar
io2B
Scenar
io3
Scenar
io4A
Scenar
io4B
Scenar
io5

42. Benefit Incidence of new enrolments
Preschool enrolment rates of children aged 3-5 by per capita income quintile
0
.2.4.6.8
1
1 2 3 4 5
Scenario 1: Supply Side Investment Grant only
Baseline Capacity increase Affordability increase 0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Scenario 2A: Supply Side Operational Grant only
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
1 2 3 4 5
Scenario 2B: Supply Side Operational Grant only
with Price Cap
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Scenario 3: Demand Side Grant only
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
1 2 3 4 5
Investment grant:50000 TL, Operational grant:300 TL
Price cap:750 TL, Voucher:0 TL
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Scenario 4A: Supply Side Investment
and Operational Grant combined
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Scenario 4B: Supply Side Investment
and Operational Grant combined with Price Cap
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Scenario 5: Supply Side Investment Grant
and Demand Side Grant combined
Baseline Capacity increase Affordability increase
0
.2.4.6.8
1
EnrolmentrateforChildrenaged3-5
1 2 3 4 5
Investment grant:50000 TL, Operational grant:300 TL
Price cap:750 TL, Voucher:0 TL
Baseline Capacity increase Affordability increase

43. Benefit incidence of grants
Benefit incidence of the grants and/or vouchers by per capita income quintile
0.0 0.0 0.0 0.0 0.0
0
200400600800
1,000
1 2 3 4 5
Scenario 1: Supply Side Investment Grant only
157.3
252.2 265.9
311.3
427.6
0
200400600800
1,000
Totalbenefit(inmillionTL)
1 2 3 4 5
Scenario 2A: Supply Side Operational Grant only
151.1
247.9 264.0
309.6
0.0
0
200400600800
1,000
1 2 3 4 5
Scenario 2B: Supply Side Operational Grant only
with Price Cap
310.7
413.7
0.0 0.0 0.0
0
200400600800
1,000
Totalbenefit(inmillionTL)
1 2 3 4 5
Scenario 3: Demand Side Grant only
165.7
284.4 287.0
318.3
434.2
0
200400600800
1,000
Totalbenefit(inmillionTL)
1 2 3 4 5
Scenario 4A: Supply Side Investment
and Operational Grant combined
163.7
291.4 284.8
316.2
0.0
0
200400600800
1,000
Totalbenefit(inmillionTL)
1 2 3 4 5
Scenario 4B: Supply Side Investment
and Operational Grant combined with Price Cap
317.0
417.1
0.0 0.0 0.0
0
200400600800
1,000
Totalbenefit(inmillionTL)
1 2 3 4 5
Scenario 5: Supply Side Investment Grant
and Demand Side Grant combined

44. Total Costs (million TL)
(Accruing to Child care Providers vs Households)
44
Benefits to
Child Care
Providers
Benefits to
Households
39
3,939
2,639
568
4,342
3,025
885
0
1,414
973
724
1,490
1,056
734
0 1,000 2,000 3,000 4,000 5,000 6,000
Supply Side Investment Grant only: One-time investment grant to child care centres.
Supply Side Operational Grant only: Monthly per student operational grant (no price cap)
Supply Side Operational Grant only with Price Cap: Monthly per student operational grant
(with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant combined (no price cap)
Supply Side Investment and Operational Grant Combined with Price Cap:
One-time investment grant and monthly per child operational grant combined (with price cap)
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households combined
Scena
rio1
Scena
rio2A
Scena
rio2B
Scena
rio3
Scena
rio4A
Scena
rio4B
Scena
rio5
Total benefit accruing to child care providers (million TL) Total benefit accruing to households (million TL)

45. Total Tax Revenue (million TL)
(Accruing to Child care Providers vs Households)
45
Newly employed women
in centres
Corporation
and Income Tax
333
1,407
1,019
0
1,759
1,422
333
0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000
Supply Side Investment Grant only: One-time investment grant to child
care centres.
Supply Side Operational Grant only: Monthly per student operational
grant (no price cap)
Supply Side Operational Grant only with Price Cap: Monthly per student
operational grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant…
Supply Side Investment and Operational Grant Combined with Price
Cap:…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households…
Scen
ario
1
Scen
ario
2A
Scen
ario
2B
Scen
ario
3
Scen
ario
4A
Scen
ario
4B
Scen
ario
5

46. Total Net Cost (million TL)
(Total cost- tax revenue)
46
-314
3,861
2,532
1,292
3,968
2,574
1,266
-1,000 -500 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500
Supply Side Investment Grant only: One-time investment grant to child care centres.
Supply Side Operational Grant only: Monthly per student operational grant (no price
cap)
Supply Side Operational Grant only with Price Cap: Monthly per student operational
grant (with price cap)
Demand Side Grant only:
Vouchers to households per child enrolled
Supply Side Investment and Operational Grant combined:
One-time investment grant and monthly per child operational grant combined (no…
Supply Side Investment and Operational Grant Combined with Price Cap:
One-time investment grant and monthly per child operational grant combined (with…
Supply Side Investment Grant and Vouchers Combined:
One-time investment grant and monthly voucher to households combined
Scena
rio1
Scena
rio2A
Scena
rio2B
Scena
rio3
Scena
rio4A
Scena
rio4B
Scena
rio5
Total Cost - Total Tax Revenue = Total Net Cost

47. Cost Effectiveness
Scenario 1
Scenario 2A
Scenario 2B
Scenario 3
Scenario 4A
Scenario 4B
Scenario 5
0
2
4
6
8
10
12
-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Increaseinenrolmentrate(%point)
Net annual cost per newly enrolled child (TL)
Most cost effective
Least cost effective
Revenue
generating
High cost,
high enrolment
High cost,
Low enrolment
Low cost,
High enrolment
Low cost,
Low enrolment

48. Cost Effectiveness and Benefit Incidence
Most cost effective
Least cost effective
Revenue
generating
High cost,
high enrolment
High cost,
Low enrolment
Low cost,
High enrolment
Low cost,
Low enrolment
Scenario 1
Scenario 2A
Scenario 2B
Scenario 3
Scenario 4A
Scenario 4B
Scenario 5
0
2
4
6
8
10
12
-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000
Increaseinenrolmentrateforthebottom40%
(%point)
Net annual cost per newly enrolled child (TL)

49. Conclusions on use of model
• The mechanism for the delivery of a child care
subsidy matters for results in terms of benefit
incidence and cost effectiveness.
• Targeting “poor households” may not be the
most pro-poor way of expanding services or
subsidizing child care - in fact the poor children
benefit more in absolute terms when they are
not targeted in the case of Turkey.
• Applications of the methodology to other country
contexts is possible. Both supply and demand
side data are needed to establish the simulation
model and results.

50. Thank you.
Contact details:
Dr. Meltem Aran
Development Analytics
meltem.aran@developmentanalytics.org
+44 1865 6000 70

51. Acknowledgments
51
This study was supported by the Swedish International
Development Cooperation Agency (SIDA). The authors would like
to thank Rıdvan Kurtipek, Yıldız Yapar, Pınar Özel Ucuzal and
Dilek Okkalı Şanalmış (Turkey Ministry of Development); Burcu
Ertuğrul and Fatih Kaynar (Turkey Ministry of Education); Güler
Özdoğan, Akın Yumuş and Fatma Küçükbaşol (Turkey Ministry of
Family and Social Policies); Facundo Cuevas (The World Bank);
Öykü Uluçay and Tomas Bergenholtz (Swedish Consulate) for
comments and guidance received during methodology review
meetings held in Ankara in February-March 2016.

52. Suggested Citation for this Work
52
Aran, Meltem A. and Munoz Boudet, Ana Maria and
Aktakke, Nazli, Building an Ex Ante Simulation Model for
Estimating the Capacity Impact, Benefit Incidence, and
Cost Effectiveness of Child Care Subsidies: An
Application Using Provider-Level Data from Turkey
(December 14, 2016). World Bank Policy Research
Working Paper No. 7917. Available at SSRN:
https://ssrn.com/abstract=2885545