Does Subsidized Childcare Matter for Maternal Labor Supply? – The Latest Piece of HETFA Working Paper Series

HETFA Working Paper No. 9. authored by Agnes Szabo-Morvai and Anna Lovasz provide a credible cutoff-based estimate at a policy-relevant point on the effect of subsidized childcare availability on Hungarian mothers’ labor supply.

The approach of the authors is that in order to find the most effective mix of policies and forecast the benefits of investment in childcare expansion, it is important to estimate the impact of childcare on mothers’ labor supply precisely.

They analyze the case of mothers of 3-year-olds in Hungary, who are much more likely to be able to enroll in state-run kindergartens if they turn 3 before the 1st of January. In Hungary, private childcare is relatively expensive and unaffordable for many people, so subsidized staterun institutions provide the primary form of childcare. Subsidized nursery schools accept children between the ages of 5 months and 3 years, while kindergartens accept children from age 3 to 6 in the analyzed period.

In the methodology, researchers used a dataset of sample that includes mothers with or without a partner, for the years 1998-2011 and included mothers with 1 or more children, excluding fathers from the analysis. They found that around the age of 3 not only does childcare availability increase, but parental leave also ends, and the willingness to separate from the child grows rapidly, as well.

Their result enables them to forecast the expected impact of childcare expansion: for example, the government recently changed eligibility rules so that all children can enroll in kindergarten immediately after they turn 3. This should lead roughly to the same increase in mothers’ activity around 19 percent.

Read HETFA Working Paper No. 9. »