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The Effects of Child Care Subsidies on Paid Child Care Participation and Labor Market Outcomes: Evidence from the Child and Dependent Care Credit

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  • Pepin, Gabrielle

    (Upjohn Institute for Employment Research)

Abstract

The Child and Dependent Care Credit (CDCC), a tax credit based on income and child care expenses, reduces child care costs for working families. The Economic Growth and Tax Relief Reconciliation Act expanded the CDCC in 2003, generating differential increases in generosity across states and family sizes. Using data from the March Current Population Survey, the author finds that a $100 increase in CDCC generosity increases paid child care participation by 0.6 percentage points among single mothers and 2.2 percentage points among married mothers with children younger than 13 years old. The author also finds that CDCC benefits increase labor supply among married mothers, who may experience long-run earnings gains.

Suggested Citation

  • Pepin, Gabrielle, 2024. "The Effects of Child Care Subsidies on Paid Child Care Participation and Labor Market Outcomes: Evidence from the Child and Dependent Care Credit," IZA Discussion Papers 17238, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp17238
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    2. Gabrielle Pepin, 2022. "How Would a Permanently Refundable Child and Dependent Care Credit Affect Eligibility, Benefits, and Incentives?," Public Finance Review, , vol. 50(1), pages 33-61, January.
    3. Valeska Araujo & Linden McBride & Danielle H. Sandler, 2025. "The Impact of Childcare Costs on Mothers’ Labor Force Participation," Working Papers 25-25, Center for Economic Studies, U.S. Census Bureau.

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    Keywords

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    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue

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