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Dynamic Labour Supply Effects of Childcare Subsidies: Evidence from a Canadian Natural Experiment on Low-Fee Universal Child Care

39 Pages Posted: 7 Oct 2008  

Pierre Lefebvre

University of Quebec at Montreal (UQAM) - Department of Economics

Phil Merrigan

University of Quebec at Montreal (UQAM)

Matthieu Verstraete

University of Quebec at Montreal (UQAM)

Date Written: Octobre 6, 2008

Abstract

This paper shows that a temporary incentive to join the labor market or to work more can also produce substantial life-cycle labor supply effects. On September 1997, a new childcare policy was initiated by the provincial government of Quebec, the second most populous province in Canada. Licensed and regulated providers of childcare services began offering day care spaces at the subsidized fee of $5 per day per child for children aged 4. In successive years, the government reduced the age requirement, created new childcare facilities and spaces, and paid for the additional costs entailed by this low-fee policy. No such important policy changes for preschool (including kindergarten) children were enacted in the nine other Canadian provinces over the years 1997 to 2004. Using annual data drawn from Statistics Canada's Survey on Labour and Income Dynamic and a difference-in-differences quasi-experimental methodology, the paper estimates the dynamic labor supply effects of the program. The results demonstrate that the policy had long-term labor supply effects on mothers who benefited from the program when their child was less than 6. A striking feature of the results is that they are driven by changes in the labor supply of less educated mothers.

Keywords: Mother's labour supply, preschool and primary school children, childcare

JEL Classification: H42, J21, J22

Suggested Citation

Lefebvre, Pierre and Merrigan, Phil and Verstraete, Matthieu, Dynamic Labour Supply Effects of Childcare Subsidies: Evidence from a Canadian Natural Experiment on Low-Fee Universal Child Care (Octobre 6, 2008). Available at SSRN: https://ssrn.com/abstract=1279674 or http://dx.doi.org/10.2139/ssrn.1279674

Pierre Lefebvre (Contact Author)

University of Quebec at Montreal (UQAM) - Department of Economics ( email )

P.O. Box 8888, Downtown Station
Montreal, Quebec H3C 3P8
Canada
514-987-3000 x8373 (Phone)
514-987-8494 (Fax)

Phil Merrigan

University of Quebec at Montreal (UQAM) ( email )

P.O. Box 8888, Downtown Station
Succursale Centre Ville
Montreal, Quebec H3C 3P8
Canada

Matthieu Verstraete

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

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