Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Economic Analysis & Policy

Editor-in-Chief: Ludwig, Sandra / Schmitz, Hendrik

Ed. by Auriol, Emmanuelle / Barigozzi, Francesca / Brunner, Johann / Fleck, Robert / Mastrobuoni, Giovanni / Mendola, Mariapia / Requate, Till / de Vries, Frans / Wenzel, Tobias / Zulehner, Christine

4 Issues per year

IMPACT FACTOR 2017: 0.306
5-year IMPACT FACTOR: 0.492

CiteScore 2017: 0.50

SCImago Journal Rank (SJR) 2017: 0.414
Source Normalized Impact per Paper (SNIP) 2017: 0.531

See all formats and pricing
More options …
Volume 14, Issue 3


Volume 6 (2006)

Volume 4 (2004)

Volume 2 (2002)

Volume 1 (2001)

To Work or Not to Work? The Effect of Childcare Subsidies on the Labour Supply of Parents

Tuomas Kosonen
Published Online: 2014-05-29 | DOI: https://doi.org/10.1515/bejeap-2013-0073


This paper studies the effect of childcare 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 percentage points.

Keywords: parental labour supply; childcare subsidies; participation elasticity

JEL Classification: J22; J13; H22


  • Baker, M., J. Gruber, and K. Milligan. 2008. “Universal Child Care, Maternal Labour Supply and Family Well-Being.” Journal of Political Economy 116(4):709–45.CrossrefWeb of ScienceGoogle Scholar

  • Baker, M., and K. Milligan. 2008. “How Does Job-Protected Maternity Leave Affect Mothers’ Employment?” Journal of Labour Economics 26(4):655–91.CrossrefWeb of ScienceGoogle Scholar

  • Baker, M., and K. Milligan. 2010. “Evidence from Maternity Leave Expansions of the Impact of Maternal Care on Early Child Development.” Journal of Human Resources 45(1):1–32.CrossrefGoogle Scholar

  • Bertrand, M., E. Duflo, and S. Mullainathan. 2004. “How Much Should We Trust Differences-in-Differences Estimates?” Quarterly Journal of Economics 119(1):249–75.CrossrefGoogle Scholar

  • Blundell, R., A. Duncan, J. McCrae, and C. Meghir. 2000. “The Labour Market Impact of the Working Families’ Tax Credit.” Fiscal Studies 21(1):75–104.CrossrefGoogle Scholar

  • Brewer, M., A. Duncan, A. Shephard, and M. Suaréz. 2006. “Did Working Families’ Tax Credit Work? The Impact of in-Work Support on Labour Supply in Great Britain.” Labour Economics 13:699–720.CrossrefGoogle Scholar

  • Card, D., and P. Levine. 2000. “Extended Benefits and the Duration of UI Spells: Evidence from the New Jersey Extended Benefit Program.” Journal of Public Economics 78:107–38.CrossrefGoogle Scholar

  • Cascio, E. 2009. “Maternal Labor Supply and the Introduction of Kindergartens into American Public Schools.” Journal of Human Resources 44(1):140–69.Web of ScienceCrossrefGoogle Scholar

  • Eissa, N. 1995. “Taxation and Labor Supply of Married Women: The Tax Reform Act of 1986 as a Natural Experiment.” NBER Working Paper 5023.Google Scholar

  • Eissa, N., and H. Hoynes. 2004. “Taxes and the Labour Market Participation of Married Couples: The Earned Income Tax Credit.” Journal of Public Economics 88:1931–58.CrossrefGoogle Scholar

  • Eissa, N., and J. Liebman. 1996. “Labor Supply Response to the Earned Income Tax Credit.” Quarterly Journal of Economics 111(2):605–37.CrossrefWeb of ScienceGoogle Scholar

  • Felfe, C., M. Lechner, and P. Thiemann. 2013. “After-School Care and Parents’ Labor Supply.” IZA Discussion Paper, No. 7768.Google Scholar

  • Fitzpatrick, M. 2010. “Preschoolers Enrolled and Mothers at Work? The Effects of Universal Prekindergarten.” Journal of Labor Economics 28(1):51–85.Web of ScienceCrossrefGoogle Scholar

  • Gathmann, C., and B. Sass. 2012. “Taxing Childcare: Effects on Family Labor Supply and Children.” IZA Discussion Paper No. 6440.Google Scholar

  • Gelbach, J. 2002. “Public Schooling for Young Children and Maternal Labor Supply.” American Economic Review 92(1):307–22.CrossrefGoogle Scholar

  • Gonzalez, L. 2013. “The Effect of a Universal Child Benefit on Conceptions, Abortions, and Early Maternal Labor Supply.” American Economic Journal: Economic Policy 5(3):160–88.Web of ScienceGoogle Scholar

  • Goux, D., and E. Maurin. 2010. “Public School Availability for Two-Year Olds and Mothers’ Labour Supply.” Labour Economics 17:951–62.CrossrefWeb of ScienceGoogle Scholar

  • Havnes, T., and M. Mogstad. 2011. “Money for Nothing? Universal Child Care and Maternal Employment.” Journal of Public Economics 95:1455–65.CrossrefWeb of ScienceGoogle Scholar

  • Heckman, J. 1974. “Shadow Prices, Market Wages, and Labor Supply.” Econometrica 42(4):679–94.CrossrefGoogle Scholar

  • Lalive, R., and J. Zweimuller. 2004. “Benefit Entitlement and Unemployment Duration. The Role of Policy Endogeneity.” Journal of Public Economics 88:2587–616.CrossrefGoogle Scholar

  • Lefebvre, P., and P. Merrigan. 2008. “Child-Care Policy and the Labour Supply of Mothers with Young Children: A Natural Experiment from Canada.” Journal of Labour Economics 26(3):519–48.Web of ScienceCrossrefGoogle Scholar

  • Lundin, D., E. Mörk, and B. Öckert. 2008. “How Far Can Reduced Childcare Prices Push Female Labour Supply?” Labour Economics 15(4):647–59.CrossrefWeb of ScienceGoogle Scholar

  • Milligan, K., and M. Stabile. 2007. “The Integration of Child Tax Credits and Welfare: Evidence from the Canadian National Child Benefit Program.” Journal of Public Economics, Elsevier 91(1–2):305–26.CrossrefGoogle Scholar

  • Mirrlees Review. 2011. “Tax by Design: The Mirrlees Review.” In Tax by design, edited by J. Mirrlees, S. Adam, T. Besley, R. Blundell, S. Bond, R. Chote, M. Gammie, P. Johnson, G. Myles, and J. Poterba. Oxford: Oxford University Press.Google Scholar

  • Naz, G. 2004. “The Impact of Cash-Benefit Reform on Parents’ Labour Force Participation.” Journal of Population Economics 17:369–83.CrossrefGoogle Scholar

  • Nollenberger, N., and N. Rodríguez-Planas. 2011. “Child Care, Maternal Employment and Persistence: A Natural Experiment from Spain.” IZA Discussion Paper No. 5888.Google Scholar

  • OECD. 2009. “Pensions at a Glance 2009: Retirement-Income Systems in OECD Countries.”Google Scholar

  • Saez, E. 2002. “Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses.” Quarterly Journal of Economics 117(3):1039–73.CrossrefGoogle Scholar

  • Schone, P. 2004. “Labour Supply Effects of a Cash-for-Care Subsidy.” Journal of Population Economics 17:703–27.CrossrefGoogle Scholar

  • Simonsen, M. 2010. “Price of High-Quality Daycare and Female Employment.” Scandinavian Journal of Economics 112(3):570–94.Web of ScienceGoogle Scholar

  • Viitanen, T. 2007. “Childcare Voucher and Labour Market Behaviour: Experimental Evidence From Finland.” Sheffield Economic Research Paper Series, SERP Number: 2007011, UK.Google Scholar

About the article

Published Online: 2014-05-29

Published in Print: 2014-07-01

Citation Information: The B.E. Journal of Economic Analysis & Policy, Volume 14, Issue 3, Pages 817–848, ISSN (Online) 1935-1682, ISSN (Print) 2194-6108, DOI: https://doi.org/10.1515/bejeap-2013-0073.

Export Citation

©2014 by Walter de Gruyter Berlin / Boston.Get Permission

Comments (0)

Please log in or register to comment.
Log in