Childcare Costs and the Demand for Children - Evidence from a Nationwide Reform

Abstract

Exploiting the exogenous variation in childcare costs caused by a Swedish childcare reform, we are able to identify the causal effect of childcare costs on fertility in a context in which childcare enrollment is almost universal, user fees are low, and the labor force participation of mothers is very high. Anticipation of a reduction in childcare costs increased the number of first births, but only seemed to affect the timing of second births. We find a negative income effect for families with children already enrolled in child care.

Keywords: childcare, cost of children, fertility, quasi-experiment, difference-in-differences

JEL Classification: H31, J13