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Childcare Subsidies and Labor Supply: Evidence from a large Dutch Reform

Author

Listed:
  • L.J.H. Bettendorf

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Egbert L.W. Jongen

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Paul Muller

    (VU University Amsterdam)

Abstract

Over the period 2005-2009 the Dutch government increased childcare subsidies substantially, reducing the average effective parental fee by 50%, and extended subsidies to so-called guestparent care. We estimate the labour supply effect of this reform with a difference-in-differences strategy, using parents with older children as a control group. We find that the reform had a moderately sized impact on labour supply. Furthermore, the effects are an upper bound since there was also an increase in an earned income tax credit for the same treatment group over the same period. The joint reform increased the maternal employment rate by 2.3%-points (3.0%). Average hours worked by mothers increased by 1.1 hours per week (6.2%). Decomposing the hours effect we find that most of the increase in hours is due to the intensive margin response. A number of robustness checks confirm our results.

Suggested Citation

  • L.J.H. Bettendorf & Egbert L.W. Jongen & Paul Muller, 2012. "Childcare Subsidies and Labor Supply: Evidence from a large Dutch Reform," Tinbergen Institute Discussion Papers 12-093/I, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20120093
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    More about this item

    Keywords

    Childcare subsidies; labour participation; hours worked; difference-in-differences;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • 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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