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Will childcare subsidies increase the labour supply of mothers in Ireland?

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  • Karina Doorley
  • Dora Tuda
  • Luke Duggan

Abstract

We study the effect of the largest childcare subsidy scheme in Ireland, a country where, historically, mothers provided childcare and did not participate on the labour market. In 2019, the cost of full‐time centre‐based childcare was among the most expensive in the OECD. At the end of 2019, a means‐tested childcare subsidy was introduced to improve childcare affordability, but nothing is known of the maternal labour supply effects. We model the joint decision of labour supply and childcare for lone and coupled mothers of children under six. Mothers are likely to respond to the introduction of childcare subsidies in 2019 by switching from informal childcare to formal childcare (12 percentage points), and by slightly increasing their participation in the labour market (0.5 percentage points). We simulate that recent (2023) reforms of the National Childcare Scheme, which increase the generosity and the scope of the subsidy, will increase mothers' participation by one further percentage point, but also substantially decrease the demand for informal childcare. Extending childcare subsidies to informal care (such as childminders and nannies) would decrease the demand for formal childcare and further increase maternal labour supply.

Suggested Citation

  • Karina Doorley & Dora Tuda & Luke Duggan, 2025. "Will childcare subsidies increase the labour supply of mothers in Ireland?," Fiscal Studies, John Wiley & Sons, vol. 46(2), pages 239-259, June.
    • Handle: RePEc:wly:fistud:v:46:y:2025:i:2:p:239-259
    DOI: 10.1111/1475-5890.12399
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    Cited by:

    1. Doorley, Karina & Duggan, Luke & Simon, Agathe & Tuda, Dora, 2023. "Distributional impact of tax and welfare policies: Budget 2024," Quarterly Economic Commentary: Special Articles, Economic and Social Research Institute (ESRI).
    2. Doorley, Karina & Tuda, Dora & Duggan, Luke, 2023. "Extending the National Childcare Scheme to childminders: Cost and distributional effect," Papers BP2024/3, Economic and Social Research Institute (ESRI).
    3. Doorley, Karina & O'Shea, Richard, 2025. "Childcare subsidies, childcare costs and benefit erosion: Simulations for Ireland," Papers WP799, Economic and Social Research Institute (ESRI).
    4. McQuinn, Kieran & O'Toole, Conor & Kenny, Eoin & Hauser, Lea, 2023. "Quarterly Economic Commentary, Winter 2023," Forecasting Report, Economic and Social Research Institute (ESRI), number QEC2023WIN.

    More about this item

    JEL classification:

    • 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
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities

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