Do reduced child care prices make parents work more?

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 determined by a handful of observed characteristics, we are able to match households 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: J21, J13