Negative Externalities in Day Care: Optimal Tax Policy Response
Systematic pediatric evidence shows that the morbidity rates for children in day care are increasing in the group size.Sick children are usually cared for at home by parents. This creates a negative externality of parents' labor force participation. The social optimum implies lower group size than the non--intervention market equilibrium. We study the optimal tax policy. The cost of labor force participation should be increased. This can be done by either or both a tax on day care services and a home care allowance. The cost of providing day care should be decreased by a subsidy to entrepreneurs running day care centers. This policy will decrease the group size. It is, however, not necessarily the case that this will decrease labor force participation.
|Date of creation:||09 Apr 2002|
|Contact details of provider:|| Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden|
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- Lundholm, M. & Ohlsson, H., 1995.
"Wages for Women and Publicly Financed Day Care,"
1995-23, Uppsala - Working Paper Series.
- Theodore C. Bergstrom & Sören Blomquist, "undated".
"The Political Economy of Subsidized Day Care,"
ELSE working papers
015, ESRC Centre on Economics Learning and Social Evolution.
- Pitt, Mark M & Rosenzweig, Mark R, 1990. "Estimating the Intrahousehold Incidence of Illness: Child Health and Gender-Inequality in the Allocation of Time," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(4), pages 969-980, November.
- Ted Bergstrom & Soren Blomquist, 1994.
"Political Economy of Subsidized Day Care,"
- Bergstrom, T. & Blomquist, S., 1993. "The Political Economy of Subsidized Day Care," Papers 93-30, Michigan - Center for Research on Economic & Social Theory.
- Ted Bergstrom & Soren Blomquist, 1994. "The Political Economy of Publicly Supplied Day Care," Papers _034, University of Michigan, Department of Economics.
- Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-567, December.
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