Unintended Consequences: How New Subsidy Regulations Reduced Child Care Supply in Rural and Urban Communities

As America's child care landscape becomes more regulated, policymakers are grappling with whether to regulate home-based license-exempt care, commonly known as Family, Friend, and Neighbor (FFN) care. In 2017, Illinois imposed new training requirements on FFN providers in the state's Child Care Assistance Program (CCAP). While the policy intended to improve child care quality, prior research shows that it disincentivized providers from participating in CCAP. I shed light on how child care regulation impacts rural communities - who are more dependent on home-based care - by examining: How did the threat of new training requirements affect the supply of subsidized FFN care in rural versus urban Illinois communities? Using CCAP administrative data, interviews with staff from Child Care Resource and Referral Agencies, and a triple difference-in-differences methodology, I found that announcing training requirements led to large reductions in subsidized FFN care supply across rural and urban areas. Results suggest that rural communities may have experienced a lower decrease, although this decrease was not significant due to large standard errors. Many rural providers may not have reacted to the requirements due to lack of awareness of the new policy, caused by weaker social networks and less access to internet and technology.