Scandinavian Working Papers in Economics

Discussion Paper Series in Economics,
Norwegian School of Economics, Department of Economics

No 13/2012: Care or Cash? The Effect of Child Care Subsidies on Student Performance.

Sandra Black (), Paul J. Devereux (), Katrine V. Løken () and Kjell G. Salvanes ()
Additional contact information
Sandra Black: University of Texas, Austin, Postal: University of Texas, Austin
Paul J. Devereux: University College Dublin, Postal: University College Dublin, Dublin, Ireland
Katrine V. Løken: University of Bergen, Postal: Department of Economics, University of Bergen, Bergen, Norway
Kjell G. Salvanes: Dept. of Economics, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Economics, Helleveien 30, N-5045 Bergen, Norway

Abstract: Given the wide use of childcare subsidies across countries, it is surprising how little we know about the effect of these subsidies on children’s longer run outcomes. Using a sharp discontinuity in the price of childcare in Norway, we are able to isolate the effects of childcare subsidies on both parental and student outcomes. We find very small and statistically insignificant effects of childcare subsidies on childcare utilization and parental labor force participation. Despite this, we find significant positive effect of the subsidies on children’s academic performance in junior high school, suggesting the positive shock to disposable income provided by the subsidies may be helping to improve children’s scholastic aptitude.

Keywords: Childcare; subsidies; academic performance

JEL-codes: H52; J13

52 pages, May 16, 2012

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