Taxing Childcare: Effects on Family Labor Supply and Children

Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce inf...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Gathmann, Christina, Sass, Björn
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2012
Subjects
Cognition & reasoning
Cognitive ability
Families & family life
Labor supply
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Summary:Previous studies report a wide range of estimates for how female labor supply responds to childcare prices. We shed new light on this question using a reform that raised the prices of public daycare. Parents respond by reducing public daycare and increasing childcare at home. Parents also reduce informal childcare indicating that public daycare and informal childcare are complements. Female labor force participation declines and the response is strongest for single parents and low-income households. The short-run effects on cognitive and non-cognitive skills are mixed, but negative for girls. Spillover effects on older siblings suggest that the policy affects the whole household, not just targeted family members.