Long-term effects of cash for childcare on mothers' labour supply

Abstract:

In 1998-99 a cash benefit for 1- to 2-year-olds who do not use subsidized childcare on full-time basis was introduced in Norway. A large-scale appraisal shortly after introduction concluded that the effects on mothers' labour supply were surprisingly small.

The more long-term effects reported in this paper suggest that this conclusion may need modification. Almost 4 years after the reform the employment probability had declined significantly, and employed mothers were much more likely to be on leave. All in all the reduction in labour supply is estimated to be 3¾ hours per week or almost 20 per cent.