Abstract
The employment effects of family policies depend on the mother’s labor market attachment and on the age of the child. We study the effects of child home care (cash-for-care) and private day care allowances on mothers’ return to employment after childbirth. Our identification strategy exploits changes in municipal-level subsidies. We find that higher private day care allowances have no effect while higher home care allowances increase the length of home care. A 100-euro higher level of home care allowance prolongs home care by 2–3 months, on average. The home care allowance combined with low labor market attachment and low earnings potential pre-birth delay the return to employment. However, the effect of the allowance diminishes over time. Higher subsidies have no impact by the time a child turns two. Reductions in subsidies stimulate a faster return to employment.
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