Abstract
Abstract This article quantifies the relative effectiveness of childcare subsidies and subsidies on grandmothers’ time on married mothers’ employment and fertility rates, paying special attention to heterogeneous effects. A heterogeneous agent model, populated by married households who make decisions related to labour supply and fertility, and the Spanish economy are used as a benchmark for calibration. The results indicate that childcare subsidies conditional on employment are more effective than subsidies on grandmothers’ time to foster the participation of married mothers in the labour force. However, they induce women to work fewer hours, unless after-school hours are also subsidised. This overtime subsidy is also necessary for the fertility rate to increase, but it implies a significant adjustment in tax rates to maintain the same fiscal balance. If the aim is simply to raise the employment rate of mothers of children aged 2 years or younger, then subsidising childcare costs only is more effective because the fiscal effort is lower. Regarding the heterogeneous effects, in all the policies studied, the growth in female employment is mainly accounted for by the behaviour of women without tertiary education while that of fertility is accounted for by women with tertiary education. Considerations related to inequality and distributional effects of these policies would also seem to favour childcare subsidies versus subsidies on grandmothers’ time.
Highlights
This article quantifies the relative effectiveness of childcare subsidies and subsidies on grandmothers’ time on married mothers’ employment and fertility rates, paying special attention to heterogeneous effects
GarcíaMorán and Kuehn (2017), based on a model of residence choice, fertility decisions, and female labour market participation, studied the effects of grandparent-provided childcare on female labour market outcomes and geographical mobility. None of these works propose to examine the quantitative implications of childcare subsidies and subsidies on grandmothers’ time for female employment and fertility based on a model with a rich institutional structure regarding family policies, including the necessary fiscal adjustments and paying special attention to heterogeneous effects
Parameter values were chosen so that the model is consistent with 2016 Spanish data related to the labour market, fertility, and childcare statistics
Summary
Abstract: This article quantifies the relative effectiveness of childcare subsidies and subsidies on grandmothers’ time on married mothers’ employment and fertility rates, paying special attention to heterogeneous effects. GarcíaMorán and Kuehn (2017), based on a model of residence choice, fertility decisions, and female labour market participation, studied the effects of grandparent-provided childcare on female labour market outcomes and geographical mobility None of these works propose to examine the quantitative implications of childcare subsidies and subsidies on grandmothers’ time for female employment and fertility based on a model with a rich institutional structure regarding family policies, including the necessary fiscal adjustments and paying special attention to heterogeneous effects. As far as government policy is concerned, the government needs to raise revenue through income taxes, τ(i, j, y, k, t), which are progressively introduced to finance cash family benefits for working mothers with a child aged 2 years or younger, T , childcare subsidies, θy, subsidies on grandmothers’ time, grsub, and to provide public childcare, p1g and p2g. Families are entitled to tax allowances based on the age of the child
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