Having it All, for All: Child-Care Subsidies and Income Distribution Reconciled

33 Pages Posted: 24 Apr 2019

See all articles by Francesca Barigozzi

Francesca Barigozzi

University of Bologna - Department of Economics

Helmuth Cremer

University of Toulouse (GREMAQ & IDEI); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Kerstin Roeder

University of Augsburg

Date Written: April 2019

Abstract

This paper studies the design of child-care policies when redistribution matters. Traditional mothers provide some informal child care, whereas career mothers purchase full time formal care in the market. The sorting of women across career paths is endogenous and shaped by a social norm about gender roles in the family. Via this social norm traditional mothers' informal child care imposes an externality on career mothers, so that the market outcome is inefficient. Informal care is too large and the group of career mothers is too small so that inefficiency and gender inequality go hand in hand.

In a first-best, full information word redistribution across couples and efficiency are separable. Redistribution is performed via lump-sum transfers and taxes which are designed to equalize utilities across all couples. The efficient allocation of child care is obtained by subsidizing formal care at a Pigouvian rate.

However, in a second-best settings, we show that a trade-off between the reduction of gender inequality and redistributive considerations emerge. The optimal uniform subsidy is lower than the "Pigouvian" level. Under a nonlinear policy the first-best "Pigouvian" rule for the (marginal) subsidy on informal care is reestablished. While the share of high career mothers continues to be distorted downward for incentive reasons, this policy is effective in reconciling the objectives of reducing the child care related gender inequalities and achieving a more equal income distribution across couples.

Keywords: Child Care, child care subsidies, redistribution, Social norms, women's career choices

JEL Classification: D13, H23, J16, J22

Suggested Citation

Barigozzi, Francesca and Cremer, Helmuth and Roeder, Kerstin, Having it All, for All: Child-Care Subsidies and Income Distribution Reconciled (April 2019). CEPR Discussion Paper No. DP13675. Available at SSRN: https://ssrn.com/abstract=3376606

Francesca Barigozzi (Contact Author)

University of Bologna - Department of Economics ( email )

P.zza Scaravilli 2
40126 Bologna, 40126
Italy

Helmuth Cremer

University of Toulouse (GREMAQ & IDEI) ( email )

Toulouse, 31000
France
+33 1 6112 8606 (Phone)
+33 1 6112 8637 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Kerstin Roeder

University of Augsburg ( email )

Universitätsstr. 2
Augsburg, 86159
Germany

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
40
PlumX Metrics