Three Family Policies to Reconcile Fertility and Labor Supply

Abstract

In a model with endogenous fertility and labor supply three instruments of family policies are analyzed: child benefits, subsidies for external child care, and parental leave payments. We compare the impact on the quantity and quality of children, the secondary earner’s labor supply and welfare. Child benefits and subsidies for external child care are more effective in balancing family and work than parental leave payments. The welfare analysis shows that the introduction of subsidies for external child care into a welfare program with child benefits makes families better off.

Keywords: fertility, quality of children, child care, secondary earner’s labor supply, time allocation, parental leave payments

JEL Classification: H310, H530, J130, J220