Can Child Care Policy Encourage Employment and Fertility? Evidence from a Structural Model

33 Pages Posted: 2 Nov 2009

See all articles by Peter Haan

Peter Haan

DIW Berlin, German Institute for Economic Research; IZA Institute of Labor Economics

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research

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Abstract

In this paper we develop a structural model of female employment and fertility which accounts for intertemporal feedback effects between the two outcomes. We identify the effect of financial incentives on the employment and fertility decision by exploiting variation in the tax and transfer system which differs by employment state and number of children. To this end we simulate in detail the effects of the tax and transfer system including child care costs. The model provides estimates of structural preferences of women which can be used to study the effect of various policy reforms. In particular, we show that increasing child care subsidies conditional on employment increases labor supply of all women as well as fertility of the childless and highly educated women.

Keywords: employment, fertility, financial incentives

JEL Classification: C23, C25, J22, J64

Suggested Citation

Haan, Peter and Wrohlich, Katharina, Can Child Care Policy Encourage Employment and Fertility? Evidence from a Structural Model. IZA Discussion Paper No. 4503. Available at SSRN: https://ssrn.com/abstract=1497709

Peter Haan (Contact Author)

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Katharina Wrohlich

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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