Combining parenthood and work: transmission channels and heterogeneous returns to early public childcare

We exploit local and temporal variation in the availability of public childcare for children under the age of three that induces exogenous variation in childcare attendance. We find a weak, positive average treatment effect (ATE) on maternal labor supply. The estimation of the average treatment effect is interesting – however, possibly masking important effect heterogeneity. Examining selection behavior and estimating marginal treatment effects along the distribution of observables and unobservables that drive individual treatment decisions reveal transmission channels and uncover substantial heterogeneity in marginal returns from public childcare reforms. By estimating marginal returns, we detect reverse selection on gains at the intensive margin, whereas a substantial share (40 percent) of mothers with median desire to public childcare react with increased probability to work full time. Thus, if the supply of public childcare is expanded from a modest to a more generous level of coverage, those with average resistance towards early public childcare do gain. At the extensive margin, positive selection on gains is found; however, only a small fraction of mothers with the lowest distaste for early public childcare shift from non-employment to part-time jobs.