Dynamism in the childcare sector - Can admission systems support better creative destruction?
This post is inspired by the ideas of my PhD advisor, Peter Howitt, winner of the 2025 Nobel prize in economics.
Dynamism in Copenhagen childcare
As a student of Peter Howitt in the 1990s, I have always been interested in dynamism, and how all of us can contribute to systems of disruption that reward better methods by rendering previous methods obsolete. Here is a quote from Peter and his coauthor, Philippe Aghion, about why creative destruction is so fundamental to our society.*
Who gains from innovations, who loses, and how, much all depend on institutions and policies. By focusing on these influences in a model where entrepreneurs introduce new technologies that render previous technologies obsolete we hope to understand why those who would gain from growth prevail in some societies, while in others they are blocked by those who would lose.
Working in Copenhagen with a new family in the early 2000s, I was inspired by the dynamism that is the childcare sector. To understand the dynamic processes surrounding childcare, I began a research project on childcare that has focused on the design of admission systems, which are at the center of how childcare systems manage childcare assignments in real time - so called rolling admission systems.
Childcares are small and many. People have choices when and where to go to childcare, and there is a constant churning of new children into childcares at all months of the year. Childcare is also growth sector. It is valuable from a market perspective, because effective childcare has given women increased agency to pursue higher education and get higher paying jobs, and there is a search for ways to create childcare facilities that mimic and build on the benefits of home care for all children. Childcare improvements are at the heart of major social changes that have caused a re-orientation of political sciences to the problem of childcare around the world.
A healthy process of growth and renewal is achieved if there is a clear strategy to replace outdated methods by better ones - but how do we do this in a childcare systems?
Childcare centers are the outcomes of innovations and investments. Some boast beautiful playgrounds and modern facilities, while others stand out for their exceptional management or nurturing staff. Parents place great trust in the people who care for their children, and staff quality often plays a major role in their decision. Many factors contribute to an effective childcare environment, and the importance of each factor can vary from one family to another. One center may attract parents with its safe, well-equipped play areas in a convenient city location, while another may be preferred for its warm, welcoming teachers who create a sense of community for both children and parents. For example, in our own survey, we found that many Copenhagen parents prioritized unstructured, outdoor play experiences over more structured, teacher-directed activities.
To understand creative destruction in childcare markets, we need to better understand the trade-offs parents face when choosing childcares. For example, in a survey of Copenhagen parents, we asked two pointed questions about childcare choices:
Can you indicate the name of a childcare facility that you liked better that you did not choose because the anticipated waiting time was too long
Can you indicate the name of a childcare facility that was closer than the childcare you listed, even though the anticipated waiting time was less than your chosen childcare.
We found that 44 percent of respondents could point to a daycare that they avoided even though it was closer to their home and they believed that this daycare did not have a long wait-list. We also found that 36 percent of parents could point to a specific daycare institution that they liked better than their two listed daycare facilities, but which they chose not to list because the daycare had too long of a wait list.**
Municipalities with large childcare systems and active research departments, such as Copenhagen, are well aware of which childcares families consider most valuable. The leaders and staff at these childcares are no less attuned. Childcare admission data is far from being a static snapshot viewed only on September 1, when children arrive after the annual admission process. Childcare admissions occur throughout the year. Since Copenhagen’s childcare admissions data is highly transparent, Copenhagen can continuously monitor which daycares are oversubscribed or undersubscribed on any given day. This is necessitated by the cities GPT (Guaranteed placement time) application option for parents , because Copenhagen assigns GPT applications to undersubscribed facilities.
When Copenhagen tells a parent they have wait longer for an oversubscribed childcare, it does so for everyone (There is exception for children with siblings at a childcare). When Copenhagen assigns a spot through the guaranteed placement time option, it does so with the knowledge that this center is undersubscribed, which means that this childcare is less valued by parents.
The waitlist admission data, and the design of its admissions system, helps Copenhagen to exploit two types of resources that are hard to measure (as with most types of innovative capital):
Entrepreneurial resources: The best childcare entrepreneurs are often the people who are best able to create and implement the best childcare environments.
Cultural capital: The parents with the most cultural capital have a lot of capacity to seek out the best childcare entrepreneurs.
Copenhagen can employ these resources to help build its childcare system through a process of creative destruction.
Destruction: Copenhagen uses informal knowledge from parents with cultural capital to make decisions to close ‘underperforming’ childcare facilities. This is not uncommon in the city as better facilities are built, and demographic patterns shift families in new ways.
Creation: Copenhagen uses informal knowledge of entrepreneurial capital - knowledge of which childcares are in most demand - to move staff and leaders from so-called ‘high performing’ childcares to new childcare centers and ‘lower performing’ centers.
Cultural capital is built up because parents are rewarded for investigating childcare facilities - The admission system encouraged parents to make close inspections of childcare, because they can only list a maximum of two centers in their application. Entrepreneurial capital is recognized by the municipality, because popular childcares are highly visible from nearby less popular childcares. Therefore, the municipality is able to offer rewards to good performers. Managers and employees at popular childcares benefit in terms of career advancement and mobility. The municipality sees what investments in childcare - facilities and people - are winners. None of this depends on childcare being a market - there are no prices - and none of this depends on childcares being private - valuable innovation are also prized by systems with lots of public childcares like Copenhagen.
Warnings for the rest of Denmark
I have also previously posted that Danish municipalities can choose one of two systems (by how they structure guaranteed placement time GPT policy)
Copenhagen. Parents are free to choose approximately when and exactly where to start childcare. This occurs if GPT admissions are directed to undersubscribed childcares.
Possibility outside Copenhagen. Parents choose when to start childcare, but the admission system decided where. This occurs if GPT admissions are directed to oversubscribed childcares.
The two possible systems reflect fundamental differences with regards to how communities can accept and manage dynamism in the childcare sector. Policy 2. makes childcare admissions a lot more like Head Start programs in the United States, which means that the administrators have a lot fewer ‘market’ signals of childcare qualities.
The emergence of GPT applications is a recent phenomenon in Denmark. It is perhaps a waring that Denmark may be giving up on encouraging the messy and difficult decisions that creative destruction demands.
This might seem like the choice of a quiet life where childcare is subject to less scrutiny from market forces, but communities that do not find ways to innovate childcare, may find that childcare becomes more costly and less satisfactory to parents who see alternatives in other places.
Challenges in the United States
Comparable forces of dynamism, which are harnessed by Copenhagen, might be missing in other childcare systems that adopt different practices regarding admissions and related policies.
In the United States, for example, the Head Start program allocates places through administrative decision-making. Because free childcare options are scarce, administrators consistently face oversubscribed lists. As a result, all oversubscribed centers effectively look the same—there is always someone willing to take a free spot, wherever and whenever it appears. This suppresses meaningful differentiation and weakens the incentives for innovation or quality improvement.
The private childcare sector may fare little better. There is no reliable coordination mechanism that allows choices of other parents to signal which centers deliver greater value. Centers can either set higher prices—leading to shorter waitlists and earlier admissions—or lower prices—resulting in longer waitlists and delayed entry. Consequently, centers serve distinct socioeconomic groups, and parents struggle to interpret whether price or waiting time best indicates quality. Lack of coordination in childcare admissions means that all childcare facilities have incentives to maintain long complicated waitlists, and incentives exist to triage admissions to choose children who are easier to serve. Furthermore, childcare is not driven by the implementation of killer new AI technologies, which drive innovations in other sectors. Instead, innovation is through strong local management, careful recruiting and quality ‘bricks and mortar’ facilities.
The mixed system in United States also points to a larger innovation problem:
There is no incentive to innovate towards a universal childcare sector, where admissions and childcare practices are inclusive.
Therefore, despite its growing importance, childcare in the United States does not serve the same famous melting pot role that we often see in American schools. Copenhagen offers a useful counter example, where creative destruction is put to work in efforts to attain melting pot goals, by creating opportunities to easily see and reward innovations that allow childcares to be more inclusive.
Conclusions
Improving childcare requires identifying which practices are worth sharing, but experimentation can take different forms. Scientists aim to hold conditions constant (avoiding childcare selection issues) to isolate causal effects, while Copenhagen uses an entrepreneurial model, introducing new approaches to attract families. Both seek to demonstrate value, but entrepreneurs do so in the marketplace by getting parents to changes their choices.
Short-run metrics, such as childcare oversubscription and undersubscription, provide valuable insights, yet such data are scarce outside Copenhagen. By studying these metrics, scientists could be encouraged to work on dynamism in childcare. The approach is simply to adopt an experimental approach to innovations that are rewarded by market responses. These responses can then be collaborated with other childcare outcomes, like childhood development, and goals of inclusion and diversity.
My current research with Chris Nielson (Yale), Bobby Pakzad Hurson (Brown), Andreas Bjerre Nielson (SODAS), Mette Gørtz (KU), Elena Mattana (AU), and leaders from the municipality of Copenhagen aims to capture these dynamics in Copenhagen’s system, and we believe extending this research beyond Copenhagen would allow childcare scientists to better integrate experiments into ongoing systems experiencing active innovation and creative turnover.
* Philippe' Aghion and Peter Howitt in Chapter 2 of Growth with Quality-Improving Innovations: An Integrated Framework. Handbook of Economic Growth
** The survey questions are part of my collaborative research to study and develop better childcare admission systems. See National. grant. The entire survey was design in collaboration with Chris Nielson (Yale), Bobby Pakzad Hurson (Brown), Andreas Bjerre Nielson (SODAS), Mette Gørtz (KU), Elena Mattana (AU), and leaders from the municipality of Copenhagen.