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Taxing Childcare: Effects on Family Labor Supply and Children

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  • Gathmann, Christina

    (LISER)

  • Sass, Björn

    (University of Mannheim)

Abstract

Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce informal childcare indicating that public daycare and informal childcare are complements. Female labor force participation declines and the response is strongest for single parents and low-income households. The short-run effects on cognitive and non-cognitive skills are mixed, but negative for girls. Spillover effects on older siblings suggest that the policy affects the whole household, not just targeted family members.

Suggested Citation

  • Gathmann, Christina & Sass, Björn, 2012. "Taxing Childcare: Effects on Family Labor Supply and Children," IZA Discussion Papers 6440, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp6440
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    More about this item

    Keywords

    childcare; labor supply; cognitive skills; family policy; Germany;
    All these keywords.

    JEL classification:

    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy

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