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Having it all, for all: child-care subsidies and income distribution reconciled

Author

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  • Barigozzi, Francesca
  • Cremer, Helmuth
  • Roeder, Kerstin

Abstract

This paper studies the design of child-care policies when redistribution matters. Traditional mothers provide some informal child care, whereas career mothers purchase full time formal care in the market. The sorting of women across career paths is endogenous and shaped by a social norm about gender roles in the family. Via this social norm traditional mothersinformal child care imposes an externality on career mothers, so that the market outcome is inefficient. Informal care is too large and the group of career mothers is too small so that inefficiency and gender inequality go hand in hand. In a first-best, full information word redistribution across couples and efficiency are separable. Redistribution is performed via lump-sum transfers and taxes which are designed to equalize utilities across all couples. The efficient allocation of child care is obtained by subsidizing formal care at a Pigouvian rate. However, in a second-best settings, we show that a trade-off between the reduction of gender inequality and redistributive considerations emerge. The optimal uniform subsidy is lower than the Pigouvianlevel. Under a nonlinear policy the first-best Pigouvianrule for the (marginal) subsidy on informal care is reestablished. While the share of high career mothers continues to be distorted downward for incentive reasons, this policy is effective in reconciling the objectives of reducing the child care related gender inequalities and achieving a more equal income distribution across couples.

Suggested Citation

  • Barigozzi, Francesca & Cremer, Helmuth & Roeder, Kerstin, 2019. "Having it all, for all: child-care subsidies and income distribution reconciled," TSE Working Papers 19-1005, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:122917
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    References listed on IDEAS

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    1. Lídia Farré & Francis Vella, 2013. "The Intergenerational Transmission of Gender Role Attitudes and its Implications for Female Labour Force Participation," Economica, London School of Economics and Political Science, vol. 80(318), pages 219-247, April.
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    7. Barigozzi, Francesca & Cremer, Helmuth & Roeder, Kerstin, 2018. "Women's career choices, social norms and child care policies," Journal of Public Economics, Elsevier, vol. 168(C), pages 162-173.
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    More about this item

    Keywords

    Child care; womens career choices; child care subsidies; redistribution; social norms;

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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