Urbanization, waitlisted children, and childcare support in a two‐region overlapping generations model

Abstract

We present a two‐region overlapping generations model to analyze the effect of an urban childcare policy that decreases the ‘standby probability’ with which children are waitlisted for childcare facilities. When parents devote a portion of their time to childcare, such a policy increases urban fertility and changes the population distribution between regions, capital accumulation, and social welfare in the long run. The urban population ratio decreases in the short run but increases in the long run when the steady state moves from dispersion to dispersion. Though the fertility in the economy may decrease or increase in the short run, it increases in the long run when the steady state moves from agglomeration (or dispersion) to dispersion. Welfare is improved in any type of move (with a plausible assumption). Governments should operate their local childcare policies while considering the long‐run effects on the population distribution between regions.