The Political Economy of Subsidized Day Care

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The Political Economy of Subsidized Day Care

Author Info

Theodore C. Bergstrom
Sören Blomquist

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Ted Bergstrom

Abstract

This paper presents a theoretical model of political support for the public provision of day care. In an economy where there are high taxes on wage income, sel sh taxpayers with no children in the day care system may favor substantial public subsidies to day care because such subsidies induce mothers to join the labor force and hence pay income tax. Our model makes explicit quantitative predictions of the relation between the distribution of wages, the income tax rate, and the subsidy rate for day care that maximizes net tax revenue from parents of small children. Applying parameter values from Sweden and the United States, we nd that our model predicts a subsidy rate of between 50% and 100% for Sweden with its high tax rate on wages and between 15% and 30% for the U.S. with its lower tax rate on wages.

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Paper provided by ESRC Centre on Economics Learning and Social Evolution in its series ELSE working papers with number 015.

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Handle: RePEc:els:esrcls:015

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Article
- Bergstrom, Ted & Blomquist, Soren, 1996. "The political economy of subsidized day care," European Journal of Political Economy, Elsevier, vol. 12(3), pages 443-457, November. [Downloadable!] (restricted)
Paper
- Bergstrom, T. & Blomqust, S., 1993. "The Political Econmomy of Subsidized Day Care," Papers 1993-15, Uppsala - Working Paper Series.
- Bergstrom, T. & Blomquist, S., 1993. "The Political Economy of Subsidized Day Care," Papers 93-30, Michigan - Center for Research on Economic & Social Theory.
- Ted Bergstrom & Soren Blomquist, 1995. "The Political Economy of Subsidized Day Care," University of California at Santa Barbara, Economics Working Paper Series 1995B, Department of Economics, UC Santa Barbara. [Downloadable!]

Find related papers by JEL classification:
H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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Anna Brink & Katarina Nordblom & Roger Wahlberg, 2007. "Maximum fee versus child benefit: a welfare analysis of Swedish child-care fee reform," International Tax and Public Finance, Springer, vol. 14(4), pages 457-480, August. [Downloadable!] (restricted)

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