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The fiscal return to childcare policies

David Koll, Dominik Sachs, Fabian Stuermer-Heiber and Hélène Turon
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David Koll: European University Institute
Fabian Stuermer-Heiber: LMU Munich

No 1081, 2019 Meeting Papers from Society for Economic Dynamics

Abstract: We study the long-term fiscal implications of childcare subsidies through their impact on maternal labour supply. Taking human capital accumulation into account, we explicitly capture life-cycle career aspects in a dynamic structural household model of female labour supply and childcare decisions: higher labour supply of mothers today can result in higher future earnings. In our dynamic structural model, we allow households to be heterogeneous in their taste for home produced childcare, their taste for leisure and in their access to informal childcare (e.g. by grandparents). Using German survey data, we provide a structural estimate of the degree to which childcare subsidies are dynamically self-financing through higher labour income tax revenue. Further, we explore how the marginal fiscal returns of childcare subsidies depend on the group of families targeted (e.g. low income, single parents, number of children).

Date: 2019
New Economics Papers: this item is included in nep-dge and nep-eur
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