May 2017

IZA DP No. 10813: Taxing Childcare: Effects on Childcare Choices, Family Labor Supply and Children

published in: Journal of Labor Economics, 2018, 36 (3), 665-709

Previous studies report a range of estimates for the response of female labor supply and childcare attendance to childcare prices. We shed new light on these questions using a policy reform that raises the price of public daycare. After the reform, children are 8 percentage points less likely to attend public daycare which implies a compensated price elasticity of -0.6. There is little labor supply response in the full sample, though declines for vulnerable subgroups. Spillover effects on older siblings and fertility decisions show that the policy affects the whole household, not just targeted family members.