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

38 Pages Posted: 23 Jan 2013

See all articles by Tuomas Kosonen

Tuomas Kosonen

University of Helsinki - Department of Political and Economic Studies

Multiple version iconThere are 2 versions of this paper

Date Written: January 23, 2013

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.

Keywords: parental labour supply, child-care subsidies, participation elasticity

JEL Classification: J220, J130, H220

Suggested Citation

Kosonen, Tuomas, To Work or Not to Work? The Effect of Child-Care Subsidies on the Labour Supply of Parents (January 23, 2013). CESifo Working Paper Series No. 4065, Available at SSRN: https://ssrn.com/abstract=2205619

Tuomas Kosonen (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland

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