Template-Type: ReDIF-Paper 1.0
Author-Name:  Jonathan Gruber
Author-Name-First: Jonathan 
Author-Name-Last: Gruber
Author-Email: gruberj@mit.edu
Author-Workplace-Name: MIT
Author-Name: Kristiina Huttunen
Author-Name-First: Kristiina
Author-Name-Last: Huttunen
Author-Email: kristiina.huttunen@aalto.fi
Author-Workplace-Name: Aalto University, Helsinki GSE, VATT and IZA
Author-Name: Tuomas Kosonen
Author-Name-First: Tuomas
Author-Name-Last: Kosonen
Author-Email: tuomas.kosonen@vatt.fi
Author-Workplace-Name: VATT Institute for Economic Research and Finnish Centre of Excellence in Tax Systems Research
Title: Paying Moms to Stay Home: Short and Long Run Effects on Parents and Children
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 in child home care allowance to show that home
care allowance decreases maternal employment in both the short and long term, with
almost three-quarters of the supplement amount offset by lost labor income. The
effects are large enough for the existence of home care benefit system to explain the
higher child penalty in Finland than comparable nations. Home care benefits also
negatively affect the early childhood cognitive test results of children at the age of
five, increase the likelihood of choosing vocational rather than academic secondary
education track, and increase youth crimes. We confirm that the mechanism of
action is changing work/home care arrangements by studying a a day care fee (DCF)
reform had the opposite effect of raising incentives to work. We find that this policy
increased the labor force participation of mothers and participation of children to
day care, and improved child early test and schooling outcomes. This parallel set
of findings suggests that on average in Finland, shifting child care from the home
to the market increases labor force participation and improves child outcomes.
Length: 87 pages
Creation-Date:  2022-11
Publication-Status: Published in FIT Working Paper Series, Finnish Center of Excellence in Tax Systems Research
File-URL: https://verotutkimus.fi/verotutkimus/wp-content/uploads/2023/02/FIT-WP4-Paying-Moms-to-Stay-Home-011222-1.pdf
File-Format: Application/pdf
File-Function: First version, 2022
Number: 4
Classification-JEL: J13,J21,J38
Keywords: home care allowance, employment, child development, schooling
Handle: RePEc:fit:wpaper:4