Working Papers in Economics
No 68:
Negative Externalities in Day Care: Optimal Tax Policy Response
Michael Lundholm ()
and Henry Ohlsson
Abstract: Systematic pediatric evidence shows that the morbidity
rates for children in day care are increasing in the group size.Sick
children are usually cared for at home by parents. This creates a negative
externality of parents' labor force participation. The social optimum
implies lower group size than the non--intervention market equilibrium. We
study the optimal tax policy. The cost of labor force participation should
be increased. This can be done by either or both a tax on day care services
and a home care allowance. The cost of providing day care should be
decreased by a subsidy to entrepreneurs running day care centers. This
policy will decrease the group size. It is, however, not necessarily the
case that this will decrease labor force participation.
Keywords: negative externalities; infections; day care centers; optimal taxation; Pigouvian taxes; (follow links to similar papers)
JEL-Codes: D10; D62; H23; I12; J13; J21; (follow links to similar papers)
21 pages, April 9, 2002
Before downloading any of the electronic versions below
you should read our statement on
copyright.
Download GhostScript
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
2835 HTML file
Download Statistics
Questions (including download problems) about the papers in this series should be directed to Jens Anmark ()
Report other problems with accessing this service to Sune Karlsson ()
or Björn Thodenius ().
Programing by
Design by Joachim Ekebom
