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Taxing Childcare: Effects on Family Labor Supply and Children

  • Christina Gathmann
  • Björn Sass

Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce informal childcare indicating that public daycare and informal childcare are complements. Female labor force participation declines and the response ist strongest for single parents and low-income households. The short-run effects on cognitive and non-cognitive skills are mixed, but negative for girls. Spillover effects on older siblings suggest that the policy affects the whole household, not just targeted family members.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.397727.de/diw_sp0438.pdf
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Paper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 438.

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Length: 34 : Anh. p.
Date of creation: 2012
Date of revision:
Handle: RePEc:diw:diwsop:diw_sp438
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  3. Barbara Hanel & Regina T. Riphahn, 2012. "The Employment of Mothers – Recent Developments and their Determinants in East and West Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 232(2), pages 146-176, March.
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  7. Maria Chiuri, 2000. "Quality and Demand of Child Care and Female Labour Supply in Italy," LABOUR, CEIS, vol. 14(1), pages 97-118, 03.
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  9. Kimmel, Jean, 1995. "The Effectiveness of Child-Care Subsidies in Encouraging the Welfare-to-Work Transition of Low-Income Single Mothers," American Economic Review, American Economic Association, vol. 85(2), pages 271-75, May.
  10. Averett, S.L. & Peters, H.E. & Waldman, D.M., 1992. "Tax Credits, Labor Supply, and Child Care," University of Chicago - Economics Research Center 92-9, Chicago - Economics Research Center.
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  13. Havnes, Tarjei & Mogstad, Magne, 2009. "No Child Left Behind: Universal Child Care and Children's Long-Run Outcomes," Memorandum 23/2009, Oslo University, Department of Economics.
  14. Datta Gupta, Nabanita & Simonsen, Marianne, 2007. "Non-Cognitive Child Outcomes and Universal High Quality Child Care," IZA Discussion Papers 3188, Institute for the Study of Labor (IZA).
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  16. Virginia Sanchez-Marcos & Orazio Attanasio & Hamish Low, 2004. "Explaining Changes in Female Labour Supply in a Life-Cycle Model," 2004 Meeting Papers 492, Society for Economic Dynamics.
  17. Connelly, Rachel, 1992. "The Effect of Child Care Costs on Married Women's Labor Force Participation," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 83-90, February.
  18. Anna Brink & Katarina Nordblom & Roger Wahlberg, 2007. "Maximum fee versus child benefit: a welfare analysis of Swedish child-care fee reform," International Tax and Public Finance, Springer, vol. 14(4), pages 457-480, August.
  19. Havnes, Tarjei & Mogstad, Magne, 2011. "Money for nothing? Universal child care and maternal employment," Journal of Public Economics, Elsevier, vol. 95(11), pages 1455-1465.
  20. Cecile Wetzels, 2005. "Supply and Price of Childcare and Female Labour Force Participation in the Netherlands," LABOUR, CEIS, vol. 19(s1), pages 171-209, December.
  21. Pierre Lefebvre & Philip Merrigan, 2008. "Child-Care Policy and the Labor Supply of Mothers with Young Children: A Natural Experiment from Canada," Journal of Labor Economics, University of Chicago Press, vol. 26(3), pages 519-548, 07.
  22. Siv Gustafsson & Frank Stafford, 1992. "Child Care Subsidies and Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 204-230.
  23. David Blau & Erdal Tekin, 2007. "The determinants and consequences of child care subsidies for single mothers in the USA," Journal of Population Economics, Springer, vol. 20(4), pages 719-741, October.
  24. Tom Kornstad & Thor O. Thoresen, 2002. "A Discrete Choice Model for Labor Supply and Child Care," Discussion Papers 315, Research Department of Statistics Norway.
  25. Bester, C. Alan & Conley, Timothy G. & Hansen, Christian B., 2011. "Inference with dependent data using cluster covariance estimators," Journal of Econometrics, Elsevier, vol. 165(2), pages 137-151.
  26. Florence Jaumotte, 2003. "Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries," OECD Economics Department Working Papers 376, OECD Publishing.
  27. Ribar, D.C., 1990. "Child Care And The Labor Supply Of Married Women: Reducted Form Evidence," Papers 9-90-9, Pennsylvania State - Department of Economics.
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