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The Political Economy of Publicly Supplied Day Care

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Author Info
Ted Bergstrom () (University of Michigan, Economic)
Soren Blomquist

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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, selfish 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 find 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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File URL: http://www.econ.ucsb.edu/~tedb/PubFin/daycare.ps
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Paper provided by University of Michigan, Department of Economics in its series Papers with number _034.

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Date of creation: 1994
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Handle: RePEc:wop:michec:_034

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  1. James J. Heckman, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 136-169 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  2. Atkinson, Anthony B & Stern, N H, 1974. "Pigou, Taxation and Public Goods," Review of Economic Studies, Blackwell Publishing, vol. 41(1), pages 119-28, January. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. 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. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Robin Boadway & Maurice Marchand, 1990. "The Use of Public Expenditure for Distributive Purposes," Working Papers 796, Queen's University, Department of Economics.
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  7. Besley, Timothy, 1991. " Welfare Improving User Charges for Publicly Provided Private Goods," Scandinavian Journal of Economics, Blackwell Publishing, vol. 93(4), pages 495-510.
  8. James J. Heckrnan, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 491-524 National Bureau of Economic Research, Inc. [Downloadable!]
  9. 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. [Downloadable!] (restricted)
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  10. Sherwin Rosen, 1995. "Public Employment, Taxes and the Welfare State in Sweden," University of Chicago - George G. Stigler Center for Study of Economy and State 106, Chicago - Center for Study of Economy and State.
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  11. Munro, Alistair, 1989. "In-kind transfers, cash grants and the supply of labour," European Economic Review, Elsevier, vol. 33(8), pages 1597-1604, October. [Downloadable!] (restricted)
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