Scandinavian Working Papers in Economics

Working Paper Series,
IFAU - Institute for Evaluation of Labour Market and Education Policy

No 2007:2: Do reduced child care prices make parents work more?

Daniela Lundin , Eva Mörk () and Björn Öckert ()
Additional contact information
Daniela Lundin: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Eva Mörk: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden
Björn Öckert: IFAU - Institute for Labour Market Policy Evaluation, Postal: P O Box 513, SE-751 20 Uppsala, Sweden

Abstract: This paper exploits exogenous variation in the price of child care stemming from a major child care price reform, to estimate the effects of child care costs on parents’ labour supply. The reform introduced a cap on the price that local governments could charge parents, and lead to considerable reductions in the price of child care depending on family type and region. Since the price is de-termined by a handful of observed characteristics, we are able to match house-holds that are similar in all relevant aspects, but experienced quite different price changes due to the reform. Our difference-in-differences regression matching estimates are very precise, but mostly close to zero.

Keywords: Labour supply; price of child care; difference-in-differences regression matching

JEL-codes: J13; J21

51 pages, February 8, 2007

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