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The Effectiveness of Fiscal Stimuli for Working Parents

Listed author(s):
  • Henk-Wim de Boer

    (CPB Netherlands Bureau for Economic Policy Analysis; and Faculty of Economics and Business Administration, VU University Amsterdam)

  • Egbert L.W. Jongen

    (CPB Netherlands Bureau for Economic Policy Analysis)

  • Jan Kabatek

    ()

    (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne; Institute for the Study of Labor (IZA); and Netspar)

To promote the labor participation of parents with young children, governments employ a number of fiscal instruments. Prominent examples are childcare subsidies and in-work benefits. However, which policy works best for employment is largely unknown. We study the effectiveness of different fiscal stimuli in an empirical model of household labor supply and childcare use. We use a large and rich administrative data set for the Netherlands. Largescale reforms in childcare subsidies and in-work benefits in the data period facilitate the identification of the structural parameters. We find that an in-work benefit for secondary earners that increases with income is the most effective way to stimulate total hours worked. Childcare subsidies are less effective, as substitution of other types of care for formal care drives up public expenditures. In-work benefits that target both primary and secondary earners are much less effective, because primary earners are rather unresponsive to financial incentives. Classification-C25, C52, H31, J22

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File URL: http://melbourneinstitute.unimelb.edu.au/downloads/working_paper_series/wp2015n19.pdf
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Paper provided by Melbourne Institute of Applied Economic and Social Research, The University of Melbourne in its series Melbourne Institute Working Paper Series with number wp2015n19.

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Length: 48pp
Date of creation: Sep 2015
Handle: RePEc:iae:iaewps:wp2015n19
Contact details of provider: Postal:
Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia

Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://melbourneinstitute.unimelb.edu.au/
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