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Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children

Author

Listed:
  • Jonathan Gruber
  • Tuomas Kosonen
  • Kristiina Huttunen

Abstract

We study the impacts of a policy designed to reward mothers who stay at home rather than join the labor force when their children are under age three. We use regional and over time variation to show that the Finnish Home Care Allowance (HCA) decreases maternal employment in both the short and long term. The effects are large enough for the existence of home care benefit system to explain the higher short-term child penalty in Finland than comparable nations. Home care benefits also negatively affect the early childhood cognitive test results of children, decrease the likelihood of choosing academic high school, and increase youth crimes. We confirm that the mechanism of action is changing work/home care arrangements by studying a day care fee reform that had the opposite effect of raising incentives to work – with corresponding opposite effects on mothers and children compared to HCA. Our findings suggest that shifting child care from the home to the market increases labor force participation and improves child outcomes.

Suggested Citation

  • Jonathan Gruber & Tuomas Kosonen & Kristiina Huttunen, 2023. "Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children," NBER Working Papers 30931, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30931
    Note: CH LS PE
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      by maximorossi in NEP-LTV blog on 2023-05-23 18:13:12

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    Cited by:

    1. Gozde Corekcioglu & Marco Francesconi & Astrid Kunze, 2025. "Parental Leave from the Firm’s Perspective," CESifo Working Paper Series 11868, CESifo.
    2. Glogowsky, Ulrich & Hansen, Emanuel & Sachs, Dominik & Lüthen, Holger, 2025. "The evolution of child-related gender inequality in Germany and the role of family policies, 1960–2018," European Economic Review, Elsevier, vol. 175(C).
    3. Grossmann, Jakub & Pertold, Filip & Šoltés, Michal, 2024. "Parental allowance increase and labor supply: Evidence from a Czech reform," Labour Economics, Elsevier, vol. 89(C).
    4. Claire Crawford & Laura Outhwaite, 2023. "Why should we invest in Early Childhood Education and Care?," CEPEO Briefing Note Series 24, UCL Centre for Education Policy and Equalising Opportunities, revised Mar 2023.
    5. Katherine Michelmore, 2025. "Tax credits and child outcomes: lessons from the United States, the United Kingdom and Canada," Fiscal Studies, John Wiley & Sons, vol. 46(1), pages 65-90, March.

    More about this item

    JEL classification:

    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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