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Can child care policy encourage employment and fertility? Evidence from a structural model

  • Peter Haan

    (Max Planck Institute for Demographic Research, Rostock, Germany)

  • Katharina Wrohlich

In this paper we develop a structural model of female employment and fertility which accounts for intertemporal feedback effects between the two outcomes. We identify the effect of financial incentives on the employment and fertility decision by exploiting variation in the tax and transfer system which differs by employment state and number of children. To this end we simulate in detail the effects of the tax and transfer system including child care costs. The model provides estimates of structural preferences of women which can be used to study the effect of various policy reforms. In particular, we show that increasing child care subsidies conditional on employment increases labor supply of all women as well as fertility of the childless and highly educated women.

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File URL: http://www.demogr.mpg.de/papers/working/wp-2009-025.pdf
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Paper provided by Max Planck Institute for Demographic Research, Rostock, Germany in its series MPIDR Working Papers with number WP-2009-025.

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Length: 30 pages
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:dem:wpaper:wp-2009-025
Contact details of provider: Web page: http://www.demogr.mpg.de/

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  29. Jeffrey M Wooldridge, 2002. "Simple solutions to the initial conditions problem in dynamic, nonlinear panel data models with unobserved heterogeneity," CeMMAP working papers CWP18/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  30. Akay, Alpaslan, 2009. "The Wooldridge Method for the Initial Values Problem Is Simple: What About Performance?," IZA Discussion Papers 3943, Institute for the Study of Labor (IZA).
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