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A welfare analysis of universal childcare: Lessons from a Canadian reform

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  • Montpetit, Sébastien
  • Beaureard, Pierre-Loup
  • Carrer, Luisa

Abstract

Leveraging the introduction of universal low-fee daycare in Québec in 1997, we assess the welfare effect of universal childcare provision. First, using novel data on local daycare coverage and a difference-in-differences design, we show that positive impacts on maternal labor supply and childcare use are greater in areas with larger daycare expansion, suggesting that childcare availability, not just affordability, drives these responses. We then estimate the policy's Marginal Value of Public Funds (MVPF), defined as the ratio of beneficiaries' utility gains to net governmental costs. Unlike the standard sufficient-statistics metric, which assumes a marginal change in fiscal policy, we quantify the beneficiaries' utility gains through a model of maternal labor supply and childcare choices. This allows us to relax the common marginal-policy assumption and to incorporate non-pecuniary benefits for parents. Our results indicate substantial welfare gains from universal policies, with approximately $3.5 of benefits per dollar of net government spending - over twice the amount captured by the sufficient-statistics metric. Counterfactual simulations suggest that allocating more resources to increasing availability, rather than improving affordability, could yield even larger social returns.

Suggested Citation

  • Montpetit, Sébastien & Beaureard, Pierre-Loup & Carrer, Luisa, 2024. "A welfare analysis of universal childcare: Lessons from a Canadian reform," CLEF Working Paper Series 73, Canadian Labour Economics Forum (CLEF), University of Waterloo.
  • Handle: RePEc:zbw:clefwp:300866
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    References listed on IDEAS

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    More about this item

    Keywords

    universal childcare; daycare coverage; social welfare; sufficient statistics;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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