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To Work or not to Work? The Effect of Child-Care Subsidies on the Labour Supply of Parents

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  • Tuomas Kosonen

Abstract

This paper studies the effect of child-care subsidies on parental labour supply. I use variation arising from changes in the municipality-specific supplement to Finnish child homecare allowance to identify the causal effect of subsidies on the labour force participation of parents. The variation in labour supply incentives is plausibly exogenous, since eligibility depends on municipal-level rules, but not on family income. Robustness checks indicate that the results are not driven by policy endogeneity or residential sorting. I find a robust result that 100 euros higher supplement per month reduces the maternal labour supply by 3 per cent.

Suggested Citation

  • Tuomas Kosonen, 2013. "To Work or not to Work? The Effect of Child-Care Subsidies on the Labour Supply of Parents," CESifo Working Paper Series 4065, CESifo.
    • Handle: RePEc:ces:ceswps:_4065
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    Cited by:

    1. Christina Gathmann & Björn Sass, 2018. "Taxing Childcare: Effects on Childcare Choices, Family Labor Supply, and Children," Journal of Labor Economics, University of Chicago Press, vol. 36(3), pages 665-709.
    2. Jonathan Gruber & Kristiina Huttunen & Tuomas Kosonen, 2022. "Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children," Working Papers 4, Finnish Centre of Excellence in Tax Systems Research.
    3. Tomer Blumkin & Tuomas Kosonen & Kaisa Kotakorpi, 2018. "Complexity and benefit take-up: Empirical evidence from the Finnish homecare allowance," Discussion Papers 123, Aboa Centre for Economics.
    4. Gambaro, Ludovica & Marcus, Jan & Peter, Frauke, 2019. "School entry, afternoon care, and mothers' labour supply," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 57(3), pages 769-803.
    5. Bastani, Spencer & Moberg, Ylva & Selin, Håkan, 2016. "Estimating participation responses using transfer program reform," Working Paper Series, Center for Labor Studies 2016:4, Uppsala University, Department of Economics.
    6. Kühnle, Daniel & Oberfichtner, Michael, 2020. "Cash-For-Care, or Caring for Cash? The Effects of a Home Care Subsidy on Maternal Employment, Childcare Choices, and Children's Development," IZA Discussion Papers 13271, Institute of Labor Economics (IZA).
    7. Xiao, Pengpeng, 2021. "Wage and Employment Discrimination by Gender in Labor Market Equilibrium," Working Papers 144, VATT Institute for Economic Research.
    8. Spencer Bastani & Ylva Moberg & Håkan Selin, 2021. "The Anatomy of the Extensive Margin Labor Supply Response," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(1), pages 33-59, January.
    9. Jochimsen, Beate & Fendel, Tanja, 2022. "Home Care Allowance and Labor Market Participation of Immigrant and Native-Born Mothers," VfS Annual Conference 2022 (Basel): Big Data in Economics 264104, Verein für Socialpolitik / German Economic Association.
    10. Tapio Räsänen & Eva Österbacka, 2024. "Subsidizing private childcare in a universal regime," Review of Economics of the Household, Springer, vol. 22(1), pages 199-230, March.
    11. Matthias Collischon & Daniel Kuehnle & Michael Oberfichtner, 2024. "Who Benefits from Cash†for†Care? Effects of a Home Care Subsidy on Maternal Employment, Childcare Choices, and Children’s Development," Journal of Human Resources, University of Wisconsin Press, vol. 59(4), pages 1011-1051.
    12. Eerola, Essi & Lyytikäinen, Teemu, 2015. "On the role of public price information in housing markets," Regional Science and Urban Economics, Elsevier, vol. 53(C), pages 74-84.
    13. Palviainen, Heikki, 2019. "Changing Nordic model? A policy analysis," EUROMOD Working Papers EM15/19, EUROMOD at the Institute for Social and Economic Research.
    14. Gerhard Glomm & Volker Meier, 2020. "Efficient child care subsidies: any need for cash for care?," Review of Economics of the Household, Springer, vol. 18(3), pages 773-793, September.
    15. Lundberg, Jacob & Norell, John, 2018. "Taxes, benefits and labour force participation: A survey of the quasi-experimental literature," Ratio Working Papers 313, The Ratio Institute.
    16. Eva Österbacka & Tapio Räsänen, 2022. "Back to work or stay at home? Family policies and maternal employment in Finland," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(3), pages 1071-1101, July.

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    More about this item

    Keywords

    parental labour supply; child-care subsidies; participation elasticity;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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