Childcare Subsidies and Labor Supply: Evidence from a Large Dutch Reform

Tinbergen Institute Discussion Paper 12-093/I

Posted: 16 Sep 2012

See all articles by Leon Bettendorf

Leon Bettendorf

CPB Netherlands Bureau of Economic Policy Analysis

Egbert Jongen

CPB Netherlands Bureau of Economic Policy Analysis

Paul Muller

University of Gothenburg

Date Written: September 14, 2012

Abstract

Over the period 2005-2009 the Dutch government increased childcare subsidies substantially, reducing the average effective parental fee by 50%, and extended subsidies to so-called guestparent care. We estimate the labour supply effect of this reform with a difference-in-differences strategy, using parents with older children as a control group. We find that the reform had a moderately sized impact on labour supply. Furthermore, the effects are an upper bound since there was also an increase in an earned income tax credit for the same treatment group over the same period. The joint reform increased the maternal employment rate by 2.3%-points (3.0%). Average hours worked by mothers increased by 1.1 hours per week (6.2%). Decomposing the hours effect we find that most of the increase in hours is due to the intensive margin response. A number of robustness checks confirm our results.

Keywords: Childcare subsidies, labour participation, hours worked, difference-in-differences

JEL Classification: C21, H40, J13, J22

Suggested Citation

Bettendorf, Leon and Jongen, Egbert and Muller, Paul, Childcare Subsidies and Labor Supply: Evidence from a Large Dutch Reform (September 14, 2012). Tinbergen Institute Discussion Paper 12-093/I, Available at SSRN: https://ssrn.com/abstract=2146528

Leon Bettendorf (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Egbert Jongen

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Paul Muller

University of Gothenburg ( email )

Box 640
Vasagatan 1, E-building, floor 5 & 6
Göteborg, 40530
Sweden

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