Childcare Cash Benefits and Fertility Timing in Norway

Abstract

In 1998 a new cash benefit for parents with young children was introduced in Norway. Its purpose was to provide a cash payment to parents who either preferred to care for their children at home or to compensate those who were not offered external childcare provision. It has been argued that the new policy encouraged women to stay at home with their children, possibly reducing labour supply. The policy was consequently considered gender-biased, creating reduced incentives for women to participate in the labour market and therefore encouraging a more traditional division of labour of husbands and wives. Given this background of the policy, we undertake an analysis in two parts. We ask first the question “who takes the cash benefit?” Second, by applying simple matching techniques, we ask the question “Do couples taking the benefit behave differently in terms of their fertility timing?” Using information from Norwegian registers we find that more traditional households (in a broad sense) are more likely to take the cash benefit. Those taking the benefit accelerate childbearing significantly, though the reasons why they do so varies by socio-economic groups.