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To Work or Not to Work? The Effect of Childcare Subsidies on the Labour Supply of Parents

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  • Kosonen Tuomas

    () (Government Institute for Economic Research, Arkadiankatu 7 VATT, Helsinki 00101, Finland)

Abstract

This paper studies the effect of childcare subsidies on parental labour supply. I use variation arising from changes in the municipality-specific supplement to Finnish child homecare allowance to identify the causal effect of subsidies on the labour force participation of parents. The variation in labour supply incentives is plausibly exogenous, since eligibility depends on municipal-level rules, but not on family income. Robustness checks indicate that the results are not driven by policy endogeneity or residential sorting. I find a robust result that 100 euros higher supplement per month reduces the maternal labour supply by 3 percentage points.

Suggested Citation

  • Kosonen Tuomas, 2014. "To Work or Not to Work? The Effect of Childcare Subsidies on the Labour Supply of Parents," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(3), pages 1-32, July.
  • Handle: RePEc:bpj:bejeap:v:14:y:2014:i:3:p:32:n:10
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    Cited by:

    1. repec:ucp:jlabec:doi:10.1086/696143 is not listed on IDEAS
    2. Spencer Bastani & Ylva Moberg & Håkan Selin, 2016. "Estimating Participation Responses Using Transfer Program Reform," CESifo Working Paper Series 5781, CESifo Group Munich.
    3. Bastani, Spencer & Moberg, Ylva & Selin, Håkan, 2016. "The Anatomy of the Extensive Margin Labor Supply Response," Working Paper Series 2016:11, Uppsala University, Department of Economics.
    4. Christina Gathmann & Björn Sass, 2018. "Taxing Childcare: Effects on Childcare Choices, Family Labor Supply, and Children," Journal of Labor Economics, University of Chicago Press, vol. 36(3), pages 665-709.
    5. Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
    6. Ludovica Gambaro & Jan Marcus & Frauke H. Peter, 2016. "School Entry, Afternoon Care and Mothers' Labour Supply," Discussion Papers of DIW Berlin 1622, DIW Berlin, German Institute for Economic Research.

    More about this item

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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