Economics at your fingertips  

The distortionary effect of size and factor dependent policies: The role of factor substitutability in measuring the impact of a child-care subsidy policy in Chile

Diego Escobar, Jeanne Lafortune, Loris Rubini and José Tessada

Research Department working papers from CAF Development Bank Of Latinamerica

Abstract: In an effort to increase female labor participation in Chile, firms with more than 19 women must pay for childcare for the children of their female employees. We evaluate the effects of such policy using a model that features firm heterogeneity and three factors of production: women, men and capital. In our model the policy misallocates resources, driving firms to stop hiring once they are close to the threshold, depressing female participation and wages. We calibrate the model to the Chilean economy, and analyze via counterfactuals the effects of removing this distortion. First, we find that the policy reduces female labor participation by 1%, and wages by 2%. Second, the policy redistributes welfare from men to women, increasing female welfare by 0.05%. Third, we suggest alternatives policies that would be more successful at increasing female labor participation. For example, financing childcare with a tax on profits would increase female labor participation by 4%, with similar welfare consequences as the policy in place.

Keywords: Economía; Género; Investigación socioeconómica; Políticas públicas; Trabajo y protección social; Cuidado infantil; Familia (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Open Access

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this paper

More papers in Research Department working papers from CAF Development Bank Of Latinamerica Contact information at EDIRC.
Bibliographic data for series maintained by Pablo Rolando ().

Page updated 2020-03-29
Handle: RePEc:dbl:dblwop:1104