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The Effectiveness of Fiscal Stimuli for Working Parents

Author

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  • de Boer, Henk-Wim

    (Independent Researcher)

  • Jongen, Egbert L. W.

    (Leiden University)

  • Kabátek, Jan

    (University of Melbourne)

Abstract

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. Large-scale 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.

Suggested Citation

  • de Boer, Henk-Wim & Jongen, Egbert L. W. & Kabátek, Jan, 2015. "The Effectiveness of Fiscal Stimuli for Working Parents," IZA Discussion Papers 9298, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp9298
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    Cited by:

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    3. Laun, Lisa, 2019. "In-work benefits across Europe," Working Paper Series 2019:16, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    4. de Boer, Henk-Wim & Jongen, Egbert L. W., 2020. "Analysing Tax-Benefit Reforms in the Netherlands: Using Structural Models and Natural Experiments," IZA Discussion Papers 12892, Institute of Labor Economics (IZA).
    5. Kabátek, Jan, 2015. "Essays on public policy and household decision making," Other publications TiSEM 8cdb178e-ad98-42e5-a7e1-b, Tilburg University, School of Economics and Management.
    6. Piotr Paradowski & Joanna Wolszczak-Derlacz & Eva Sierminska, 2020. "Inequality, Poverty and Child Benefits: Evidence from a Natural Experiment," LIS Working papers 799, LIS Cross-National Data Center in Luxembourg.
    7. Vafadarnikjoo, Amin & Chalvatzis, Konstantinos & Botelho, Tiago & Bamford, David, 2023. "A stratified decision-making model for long-term planning: Application in flood risk management in Scotland," Omega, Elsevier, vol. 116(C).
    8. Ziedan, Abubakr & Lima, Luiz & Brakewood, Candace, 2023. "A multiple mediation analysis to untangle the impacts of COVID-19 on nationwide bus ridership in the United States," Transportation Research Part A: Policy and Practice, Elsevier, vol. 173(C).
    9. Yuval Mazar, 2018. "The effect of child allowances on the labor supply: Evidence from the early 2000s," Bank of Israel Working Papers 2018.07, Bank of Israel.

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    More about this item

    Keywords

    differences-in-differences; latent classes; household labor supply; discrete choice; work and care policies;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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