Using unique employer-employee matched data, this study reveals the existence of a nonprofit wage premium in Japan's child care industry. Nonprofits reward experienced workers with higher education, associated with the quality of care, more than their for-profit counterparts.

In 2000, government deregulation along with the introduction of the long-term insurance scheme allowed for-profit providers of at-home care for the elderly to compete directly with nonprofit operators. According to the contract failure hypothesis, we would expect consumers to prefer nonprofit...