Parental Labour Supply Responses to the Abolition of Day Care Fees

54 Pages Posted: 27 Nov 2019

See all articles by Mathias Huebener

Mathias Huebener

German Institute for Economic Research (DIW Berlin)

Astrid Pape

Free University of Berlin (FUB)

C. Spiess

German Institute for Economic Research (DIW Berlin)

Abstract

This paper provides evidence that low private contributions to highly subsidised day care constrain mothers from working longer hours. We study the effects of a reform that abolished day care fees in Germany on parental labour supply. The reform removed private contributions to highly subsidised day care in the year before children enter primary school. We exploit the staggered reform across states with a difference-in-differences approach and event studies. Although participation in day care is almost universal for preschoolers, we provide evidence that the reform increases the intensity of day care use and the working time of mothers by about 7.1 percent. Single mothers, mothers with no younger children, mothers in denser local labour markets, and highly educated mothers react strongest. We find no evidence for labour supply responses at the extensive margin, and no evidence of responses in paternal labour supply. The effects on maternal labour supply fade-away by the end of primary school as mothers in the control group also gradually increase their labour supply as their children grow older.

Keywords: labour supply, child care costs, difference-in-differences, event study

JEL Classification: J13, J22, J38

Suggested Citation

Huebener, Mathias and Pape, Astrid and Spiess, C., Parental Labour Supply Responses to the Abolition of Day Care Fees. IZA Discussion Paper No. 12780, Available at SSRN: https://ssrn.com/abstract=3492183 or http://dx.doi.org/10.2139/ssrn.3492183

Mathias Huebener (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Astrid Pape

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
Berlin, Berlin 14195
Germany

C. Spiess

German Institute for Economic Research (DIW Berlin)

Mohrenstraße 58
Berlin, 10117
Germany

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