Care or Cash? The Effect of Child Care Subsidies on Student Performance

Black, Sandra E.; Devereux , Paul J.; Løken, Katrine Vellesen; Salvanes, Kjell G.

Care or Cash? The Effect of Child Care Subsidies on Student Performance

53 Pages Posted: 12 May 2012

Sandra E. Black

University of Texas at Austin - Center for Law, Business, and Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics; Norwegian School of Economics (NHH) - Department of Economics

Paul J. Devereux

University College Dublin - Department of Economics; IZA Institute of Labor Economics

Katrine Vellesen Løken

University of Bergen - Department of Economics

Kjell G. Salvanes

Norwegian School of Economics (NHH) - Department of Economics; IZA Institute of Labor Economics

Abstract

Given the wide use of childcare subsidies across countries, it is surprising how little we know about the effect of these subsidies on children's longer run outcomes. Using a sharp discontinuity in the price of childcare in Norway, we are able to isolate the effects of childcare subsidies on both parental and student outcomes. We find very small and statistically insignificant effects of childcare subsidies on childcare utilization and parental labor force participation. Despite this, we find significant positive effect of the subsidies on children's academic performance in junior high school, suggesting the positive shock to disposable income provided by the subsidies may be helping to improve children's scholastic aptitude.

Keywords: education, income subsidy, child care

JEL Classification: I1, J1

Suggested Citation: Suggested Citation

Black, Sandra E. and Devereux, Paul J. and Løken, Katrine Vellesen and Salvanes, Kjell G., Care or Cash? The Effect of Child Care Subsidies on Student Performance. IZA Discussion Paper No. 6541. Available at SSRN: https://ssrn.com/abstract=2056731