Working Paper: NBER ID: w11832
Authors: Michael Baker; Jonathan Gruber; Kevin Milligan
Abstract: The growing labor force participation of women with small children in both the U.S. and Canada has led to calls for increased public financing for childcare. The optimality of public financing depends on a host of factors, such as the "crowd-out" of existing childcare arrangements, the impact on female labor supply, and the effects on child well-being. The introduction of universal, highly-subsidized childcare in Quebec in the late 1990s provides an opportunity to address these issues. We carefully analyze the impacts of Quebec's "$5 per day childcare" program on childcare utilization, labor supply, and child (and parent) outcomes in two parent families. We find strong evidence of a shift into new childcare use, although approximately one third of the newly reported use appears to come from women who previously worked and had informal arrangements. The labor supply impact is highly significant, and our measured elasticity of 0.236 is slightly smaller than previous credible estimates. Finally, we uncover striking evidence that children are worse off in a variety of behavioral and health dimensions, ranging from aggression to motor-social skills to illness. Our analysis also suggests that the new childcare program led to more hostile, less consistent parenting, worse parental health, and lower-quality parental relationships.
Keywords: Childcare; Labor Supply; Family Wellbeing; Public Policy
JEL Codes: H2; J2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Introduction of Quebec's universal childcare program (J13) | Significant increase in childcare utilization (J13) |
| Significant increase in childcare utilization (J13) | Increased labor supply of married women in Quebec (J49) |
| Increased labor supply of married women in Quebec (J49) | Employment rising by 7.7 percentage points (J68) |
| Introduction of Quebec's universal childcare program (J13) | Negative effects on child outcomes (J13) |
| Increased access to childcare (J13) | Adverse effects on child well-being (J12) |
| Introduction of Quebec's universal childcare program (J13) | Deterioration of parental relationships and health (J12) |