Childcare Subsidies and Household Labor Supply

63 Pages Posted: 10 Dec 2013

See all articles by Nezih Guner

Nezih Guner

ICREA-MOVE; Autonomous University of Barcelona; Barcelona Graduate School of Economics (Barcelona GSE)

Remzi Kaygusuz

Sabanci University

Gustavo Ventura

Arizona State University (ASU)

Date Written: December 2013

Abstract

What would be the aggregate effects of adopting a more generous and universal childcare subsidy program in the U.S.? We answer this question in a life-cycle equilibrium model with heterogeneous married and single households with three key features: (i) joint labor-supply of married households along extensive and intensive margins; (ii) heterogeneity in terms of the presence of children across households; (iii) skill losses of females associated to non participation. We find that subsidies have substantial effects on female labor supply and lead to a large reallocation of hours worked from males to females. Fully subsidized childcare available to all households leads to longrun increases in the participation of married females and total hours worked by about 10.1% and 1.0%, respectively, and to a decline of male hours by 1.5%. There are large differences across households in welfare gains, as a small number of households–poorer households with children– gain significantly while others lose. Welfare gains of newborn households amount to 1.9%.

Keywords: Childcare, Household Labor Supply

JEL Classification: E62, H24, H31

Suggested Citation

Guner, Nezih and Kaygusuz, Remzi and Ventura, Gustavo, Childcare Subsidies and Household Labor Supply (December 2013). CEPR Discussion Paper No. DP9775, Available at SSRN: https://ssrn.com/abstract=2365830

Nezih Guner

ICREA-MOVE ( email )

Campus de Bellaterra-UAB Edifici B (s/n)
EDIFICI B
Cerdanyola del Vallès
, Barcelona 08193
Spain

Autonomous University of Barcelona ( email )

Plaça Cívica
Cerdañola del Valles
Barcelona, Barcelona 08193
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

Remzi Kaygusuz

Sabanci University ( email )

Gustavo Ventura

Arizona State University (ASU) ( email )

Farmer Building 440G PO Box 872011
Tempe, AZ 85287
United States