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The Political Economy of Subsidized Day Care

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Author Info

  • Bergstrom, T.
  • Blomquist, S.

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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Bibliographic Info

Paper provided by Michigan - Center for Research on Economic & Social Theory in its series Papers with number 93-30.

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Length: 17 pages
Date of creation: 1993
Date of revision:
Handle: RePEc:fth:michet:93-30

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Postal: UNIVERSITY OF MICHIGAN, DEPARTMENT OF ECONOMICS CENTER FOR RESEARCH ON ECONOMIC AND SOCIAL THEORY, ANN ARBOR MICHIGAN U.S.A.

Related research

Keywords: political economy ; day care centres;

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References

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  1. Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S136-S163, Part II, .
  2. Siv Gustafsson & Frank Stafford, 1992. "Child Care Subsidies and Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 204-230.
  3. repec:fth:louvco:9066 is not listed on IDEAS
  4. Ribar, D.C., 1990. "Child Care And The Labor Supply Of Married Women: Reducted Form Evidence," Papers 9-90-9, Pennsylvania State - Department of Economics.
  5. Boadway, R. & Marchand, M., 1990. "The use of public expenditures for distributive purposes," CORE Discussion Papers 1990066, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Blomquist, N. Soren, 1982. "Should educational expenses be deductible? : A comparison of tax bases in a model where education is a choice variable," Journal of Public Economics, Elsevier, vol. 18(1), pages 65-83, June.
  7. Munro, Alistair, 1989. "In-kind transfers, cash grants and the supply of labour," European Economic Review, Elsevier, vol. 33(8), pages 1597-1604, October.
  8. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 119-28, January.
  9. Munro, Alistair, 1991. "The optimal public provision of private goods," Journal of Public Economics, Elsevier, vol. 44(2), pages 239-261, March.
  10. David M. Blau, 1992. "The Child Care Labor Market," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 9-39.
  11. Charles Michalopoulos & Philip K. Robins & Irwin Garfinkel, 1992. "A Structural Model of Labor Supply and Child Care Demand," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 166-203.
  12. Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
  13. Besley, Timothy & Coate, Stephen, 1991. "Public Provision of Private Goods and the Redistribution of Income," American Economic Review, American Economic Association, vol. 81(4), pages 979-84, September.
  14. Besley, Timothy, 1991. " Welfare Improving User Charges for Publicly Provided Private Goods," Scandinavian Journal of Economics, Wiley Blackwell, vol. 93(4), pages 495-510.
  15. Ireland, Norman J., 1990. "The mix of social and private provision of goods and services," Journal of Public Economics, Elsevier, vol. 43(2), pages 201-219, November.
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