The impact of Recovery and Resilience Plan childcare expansion on female labour supply in Spain: An ex-ante microsimulation analysis

This paper provides an ex-ante assessment of the labour market and distributional effects of Spain’s childcare reform in 2021-2023 supported by the EU’s Recovery and Resilience Facility, which allocates EUR 670 million to create 65,000 new public childcare places for children aged 0–3. Using CHILD-EUROLAB, a discrete choice labour supply and childcare model integrated with EUROMOD, a microsimulation tax-benefit model, we simulate how increased availability of formal childcare affects mothers’ employment decisions across regional clusters defined by the scale of planned childcare expansion. The reform is expected to raise formal childcare use by nearly 17% nationwide, with the strongest gains in high expansion regions such as Madrid and Valencia. Our results indicate that this would translate into higher maternal labour participation (+3.4%) and increased working hours (+2.5%), alongside meaningful reductions in child poverty (0.11 percentage points) and poverty among children under three years old (0.53 percentage points). The additional employment generates fiscal gains of approximately EUR 96 million per year, implying that the investment could be recouped within seven years, ceteris paribus. These findings highlight the potential of early childhood investment to strengthen female employment and reduce child poverty, while illustrating the value of ex-ante microsimulation for evaluating large-scale social investments under the EU’s Recovery and Resilience Facility.