Childcare Subsidies and Household Labor Supply

Nezih Guner, Remzi Kaygusuz (rkaygusuz@sabanciuniv.edu) and Gustavo Ventura (gustavo.ventura@asu.edu)
Additional contact information
Gustavo Ventura: Arizona State University

No 8303, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: What would be the aggregate effects of adopting a more generous and universal childcare subsidy program in the U.S.? We answer this question in a life-cycle equilibrium model with joint labor-supply decisions of married households along extensive and intensive margins, heterogeneity in terms of the presence of children across households and skill losses of females associated to non-participation. We find that subsidies have substantial effects on female labor supply, which are largest at the bottom of the skill distribution. Fully subsidized childcare available to all households leads to long-run increases in the participation of married females and total hours worked by about 10.1% and 1.0%, respectively. There are large differences across households in welfare gains, as a small number of households – poorer households with children – gain significantly while others lose. Welfare gains of newborn households amount to 1.9%. Our findings are robust to differences among households in fertility and childcare expenditures.

Keywords: household labor supply; childcare (search for similar items in EconPapers)
JEL-codes: E62 H24 H31 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2014-07
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published as 'Child-Related Transfers, Household Labor Supply and Welfare' in: Review of Economic Studies, 2020, 87 (5), 2290–2321

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Related works:
Working Paper: Childcare Subsidies and Household Labor Supply (2015)
Working Paper: Childcare Subsidies and Household Labor Supply (2013)
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