Costs, output, and institutional differentiation in Danish childcare policy

Investigating differences in costs due to institutional differentiation is of central importance, since most public sectors struggle with limited reso urces combined with high demands. Similar public services produced in diffe rent institutional set-ups constitute excellent units of observation, since the production costs can be directly compared. An example of such services is found in Denmark, where the municipalities provide two types of public childcare arrangements. All Danish municipalities, to varying degrees, offe r the cheaper type, namely day-care homes. It is, however, remarkable that day-care centers and day care in private homes coexist in the same municipa lity with a cost difference of about 40 percent, Using the framework of rat ional institutionalism, this article claims that the institutional set-ups in the two kinds of childcare result in different employee strategies, whic h, together with varying sector strength, lead to widely different costs. T he case is established by an analysis of interviews with employees, politic ians and users of childcare services, combined with statistical evidence fr om the Danish municipalities.