Maximum Fee vs. Child Benefit: A Welfare Analysis of Swedish Child-Care Fee Reform

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Maximum Fee vs. Child Benefit: A Welfare Analysis of Swedish Child-Care Fee Reform

Author Info

Anna Brink () (Ministry of Finance, Sweden)
Katarina Nordblom () (Göteborg University)
Roger Wahlberg () (Göteborg University and IZA)

Additional information is available for the following registered author(s):

Katarina Nordblom

Abstract

The effects of a recent Swedish child-care fee reform are compared with those of an alternative reform, increased child benefits. The fee reform implied considerably decreased fees and was intended to increase both labor supply among parents and their economic wellbeing. We estimate labor supply effects using a discrete choice labor supply model, and simulate behavioral responses to the changes. We find positive, but small, effects on labor supply from reduced fees, while increased child benefits would make single mothers decrease their labor supply. On the other hand, increased child benefits would make income distribution more equal. We make a social welfare comparison and conclude that for plausible values of inequality aversion, the alternative reform would have been preferable to the implemented fee reform.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2748.

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Length: 39 pages
Date of creation: Apr 2007
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Handle: RePEc:iza:izadps:dp2748

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Paper
- Brink, Anna & Nordblom, Katarina & Wahlberg, Roger, 2007. "Maximum fee vs child benefit: A welfare analysis of Swedish child-care fee reform," Working Papers in Economics 250, Göteborg University, Department of Economics. [Downloadable!]

Find related papers by JEL classification:
H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

This paper has been announced in the following NEP Reports:

NEP-ALL-2007-04-21 (All new papers)
NEP-DCM-2007-04-21 (Discrete Choice Models)
NEP-PUB-2007-04-21 (Public Finance)

References listed on IDEAS
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