Discussion Paper Series in Economics, Department of Economics, Norwegian School of Economics (NHH)
Households’ responses to price changes of formal childcare.
() and Řivind A. Nilsen
Abstract: The current understanding about how households respond to
price changes in formal childcare is not extensive. This study examines
this response through a 1998 reform in Norway that introduced a money
transfer to families who did not send their child to childcare. This
cash-for-care reform raised the price of formal childcare relative to its
alternatives by about 115% for 1–2 year olds but not 3–5 year olds. Using
household surveys conducted before and after the reform the analysis
reveals that childcare attendance fell by 13.7 percentage points because of
the reform. The results also indicate that the most important alternative
to formal childcare is parental care. Furthermore, households of low
socioeconomic status are more price sensitive, with the main substitute
mode of care for this group being parental/relative care, whereas for high
socioeconomic status families the substitutes include day parks and nannies
as well as parental care.
Keywords: Public Policy; Cash Incentives; Childcare; Difference-in-Difference; (follow links to similar papers)
JEL-Codes: D10; H31; J13; (follow links to similar papers)
36 pages, October 14, 2016
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