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Jan Kabátek

Tilburg University, The Netherlands

Author: Jan Kabátek

Abstract: This paper develops a dynamic structural model of labor supply, fertility and childcare demand of married and cohabiting women in the Netherlands.  The model is estimated using a rich administrative panel covering 2001 through 2009, which provides high-quality information about individual labor market histories and childcare expenditures. Identification is aided by exploiting two large-scale reforms of Dutch family policy which raised the government spending on in-work tax credits (IWTC), and childcare subsidies, respectively. Resulting variation in the tax and subsidy rates is explicitly incorporated in the budget constraint. The estimated structural parameters are used for a counterfactual analysis, comparing predicted outcomes of several reform scenarios, including the two manifested reforms of Dutch family policy. Both IWTC and childcare subsidies are shown to induce similar changes in the maternal labor supply, but the fertility and childcare demand is stimulated more by the child- care reform.  Furthermore, changes in fertility patterns raise the budgetary costs of the childcare subsidies, as more children become eligible for subsidized childcare in the years after the implementation.

JEL classification codes: C25, C52, H31, J22

Keywords: Maternal labor supply, fertility, childcare subsidies, in-work tax credits

Full Text:  “Labour Supply, Fertility and Childcare Decisions – a Structural Analysis of Fiscal Stimuli for Working Mothers”