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Dynamic Labour Supply Effects of Childcare Subsidies: Evidence from a Canadian Natural Experiment on Low-Fee Universal Child Care

Author

Listed:
  • Pierre Lefebvre
  • Philip Merrigan
  • Matthieu Verstraete

Abstract

This paper shows that a temporary incentive to join the labor market or to work more can also produce substantial life-cycle labor supply effects. On September 1997, a new childcare policy was initiated by the provincial government of Québec, the second most populous province in Canada. Licensed and regulated providers of childcare services began offering day care spaces at the subsidized fee of $5 per day per child for children aged 4. In successive years, the government reduced the age requirement, created new childcare facilities and spaces, and paid for the additional costs entailed by this low-fee policy. No such important policy changes for preschool (including kindergarten) children were enacted in the nine other Canadian provinces over the years 1997 to 2004. Using annual data drawn from Statistics Canada's Survey on Labour and Income Dynamic and a difference-in-differences quasi experimental methodology, the paper estimates the dynamic labor supply effects of the program. The results demonstrate that the policy had long-term labor supply effects on mothers who benefited from the program when their child was less than 6. A striking feature of the results is that they are driven by changes in the labor supply of less educated mothers.

Suggested Citation

  • Pierre Lefebvre & Philip Merrigan & Matthieu Verstraete, 2008. "Dynamic Labour Supply Effects of Childcare Subsidies: Evidence from a Canadian Natural Experiment on Low-Fee Universal Child Care," Cahiers de recherche 0824, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0824
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    References listed on IDEAS

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    More about this item

    Keywords

    Mother's labour supply; preschool and primary school children; childcare policy; treatment effects; natural experiment;
    All these keywords.

    JEL classification:

    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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