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Wages, taxes and publicly provided day care

Henry Ohlsson and Michael Lundholm ()

Journal of Population Economics, 1998, vol. 11, issue 2, 185-204

Abstract: Public employment growth has been parallelled by increased female labour force participation, while real wages for typical female public sector occupations have not increased. In a theoretical model we, first, show that there is a tradeoff between day care provision and gross wages for occupations for which day care is a complement. It is possible to combine increased public labour demand with public day care provision leaving the wage unaffected. Second, non-parents will be in favour of increasing day care as long as day care productivity is higher than the inverse of the tax rate. This is because the effective labour supply and, therefore, the tax base increase. Third, parents want to push day care provision even further. They are prepared to accept a lower day care productivity than non-parents because day care provision relaxes the constraint on their desired labour supply. The Pareto efficient day care provision is between parents` and non-parents` preferred levels.

Keywords: Child; care; ·; day; care; ·; female; labour; supply; ·; tax; base; ·; public; provision; of; private; goods; ·; topping; up (search for similar items in EconPapers)
JEL-codes: D72 H31 H42 J13 J31 (search for similar items in EconPapers)
Date: 1998-05-15
Note: Received: 12 December 1995 / Accepted: 17 September 1997
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Working Paper: Wages for Women and Publicly Financed Day Care (1995)
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