Working Paper: NBER ID: w30931
Authors: Jonathan Gruber; Tuomas Kosonen; Kristiina Huttunen
Abstract: We study the impacts of a policy designed to reward mothers who stay at home rather than join the labor force when their children are under age three. We use regional and over time variation to show that the Finnish Home Care Allowance (HCA) decreases maternal employment in both the short and long term. The effects are large enough for the existence of home care benefit system to explain the higher short-term child penalty in Finland than comparable nations. Home care benefits also negatively affect the early childhood cognitive test results of children, decrease the likelihood of choosing academic high school, and increase youth crimes. We confirm that the mechanism of action is changing work/home care arrangements by studying a day care fee reform that had the opposite effect of raising incentives to work – with corresponding opposite effects on mothers and children compared to HCA. Our findings suggest that shifting child care from the home to the market increases labor force participation and improves child outcomes.
Keywords: No keywords provided
JEL Codes: H31; J13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Finnish home care allowance (HCA) (H53) | maternal employment (J22) |
| Decrease in maternal employment (J12) | child outcomes (J13) |
| Finnish home care allowance (HCA) (H53) | early childhood cognitive test results (I21) |
| Finnish home care allowance (HCA) (H53) | likelihood of children enrolling in academic high schools (I24) |
| Finnish home care allowance (HCA) (H53) | youth crime rates (K14) |
| day care fee reform (J13) | maternal employment (J22) |
| day care fee reform (J13) | child outcomes (J13) |