Modes of Child Care

25 Pages Posted: 9 Feb 2017

See all articles by Gerhard Glomm

Gerhard Glomm

Indiana University Bloomington - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Volker Meier

CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Ifo Institute for Economic Research at the University of Munich

Date Written: December 2016

Abstract

We model choices between caring for an infant at home or through some market provision of child care. Maternal labor supply necessitates child care purchased in the market. Households are distinguished along three dimensions:

(i) Exogenous income,

(ii) the wage rate of the primary care giver and

(iii) the quality which the primary caregiver provides for child care.

The market can supply child care at varying qualities and in continuous amounts. All households value consumption and child care quality. Sources of market failure comprise taxation of labor and productivity impacts on child care not fully taken account of by parents. Optimal corrective subsidies are highly correlated with taxed paid by secondary earners. In a second-best environment, typical policies of subsidizing child care will also distort quality choices. Employing “no-use subsidies” mitigates such distortions and can also counter excessive levels of subsidies for external child care.

Keywords: child care, labor supply, subsidies, family policy

JEL Classification: D130, H210, J130, J180, J220

Suggested Citation

Glomm, Gerhard and Meier, Volker, Modes of Child Care (December 2016). CESifo Working Paper Series No. 6287, Available at SSRN: https://ssrn.com/abstract=2914252

Gerhard Glomm

Indiana University Bloomington - Department of Economics ( email )

Wylie Hall
Bloomington, IN 47405-6620
United States
812-855-7256 (Phone)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Volker Meier (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Ifo Institute for Economic Research at the University of Munich ( email )

Poschingerstr. 5
Munich
Germany

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