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Maximum fee vs child benefit: A welfare analysis of Swedish child-care fee reform

  • Brink, Anna

    ()

    (Division for Tax Policy Analysis)

  • Nordblom, Katarina

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

  • Wahlberg, Roger

    ()

    (Department of Economics, School of Business, Economics and Law, Göteborg University)

The effects of a recent Swedish child-care fee reform are compared with those of an alternative reform, increased child benefits. The fee reform implied considerably decreased fees and was intended to increase both labor supply among parents and their economic well-being. We estimate labor supply effects using a discrete choice labor supply model, and simulate behavioral responses to the changes. We find positive, but small, effects on labor supply from reduced fees, while increased child benefits would make single mothers decrease their labor supply. On the other hand, increased child benefits would make income distribution more equal. We make a social welfare comparison and conclude that for plausible values of inequality aversion, the alternative reform would have been preferable to the implemented fee reform.

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File URL: http://hdl.handle.net/2077/3273
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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 250.

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Length: 36 pages
Date of creation: 03 Apr 2007
Date of revision:
Publication status: Published in International Tax and Public Finance, 2007, pages 457-480.
Handle: RePEc:hhs:gunwpe:0250
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/

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  10. Aaberge, Rolf & Colombino, Ugo & Strom, Steinar, 1999. "Labour Supply in Italy: An Empirical Analysis of Joint Household Decisions, with Taxes and Quantity Constraints," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(4), pages 403-22, July-Aug..
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