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  5. New Insights on Family Policy and Female Labor Supply
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New Insights on Family Policy and Female Labor Supply

Paper Session

Saturday, Jan. 6, 2024 10:15 AM - 12:15 PM (CST)

Grand Hyatt, Crockett A/B
Hosted By: Labor and Employment Relations Association
  • Chair: Hilary Hoynes, University of California-Berkeley

Optimal Parental Leave Policy Design

Mary Ann Bronson
,
Georgetown University
Deniz Sanin
,
University of South Carolina

Abstract

Parental leave (PL) policies across countries vary in duration, job protection, eligibility rules, generosity, payment scheme, and other dimensions, generating substantial differences in the incentives to work and have children. However, existing studies of PL policies generally find negligible or no effects of different PL designs on women's completed fertility or labor supply five or ten years after first birth, leading to a growing consensus that PL policy matters little for these decisions. In this paper, we argue that existing empirical work, which primarily studies regression discontinuities generated by PL reforms, does not estimate policy-relevant treatment effects. We then make three main contributions to analyze the effects of PL policy on women's decisions. Using evidence from the UK, Sweden, Germany, and Austria, we first show that women's decisions about work and children in those countries are consistent with the different incentives embedded in the respective PL systems. Next, we estimate a dynamic model that can capture in detail the different policy environments in these countries. We quantify the policy-relevant effects of different PL parameters on labor supply and fertility decisions, and validate the model with quasi-experimental estimates from the literature. The model simulates well women's labor supply and fertility decisions across countries, and allows us to reconcile our results, which indicate sizable responses to policy changes, with the negligible effects estimated in existing studies. Lastly, we derive the set of PL parameters that characterize the welfare-maximizing policy, and compare them to the parameters that maximize, respectively, women's labor supply and women's fertility.

An Equilibrium Model of the Impact of Increased Public Investment in Early Childhood Education

Jessica H. Brown
,
University of South Carolina
Chloe Gibbs
,
University of Notre Dame
Chris M. Herbst
,
Arizona State University
Aaron Sojourner
,
W.E. Upjohn Institute for Employment Research
Erdal Tekin
,
American University
Matthew Wiswall
,
University of Wisconsin-Madison

Abstract

Recent policy proposals call for significant new investments in early care and education (ECE). These policies are designed to reduce the burden of child care costs, support parental employment, and foster child development by increasing access to high-quality care, especially for children in lower-income families. In this paper, we propose and calibrate a model of supply and demand for different ECE service and teacher types to estimate equilibrium family expenditures, participation in ECE, maternal labor supply, teacher wages, market ECE prices, and program costs under different policy regimes. Under a policy of broadly expanded subsidies that limits family payments for ECE to no more than 7% of income among those up to 250% of national median income, we estimate that mothers’ employment would increase by six percentage points while full-time employment would increase by nearly 10 percentage points, with substantially larger increases among lower-income families. The policy would also induce a shift from informal care and parent-only care to center- and home-based providers, which are higher-quality on average, with larger shifts for lower-income families. Despite the increased use of formal care, family expenditures on ECE services would decrease throughout most of the income distribution. For example, families in the bottom three income quintiles would experience expenditure reductions of 76%, 68%, and 55%, respectively. Finally, teacher wages and market prices would increase to attract workers with higher levels of education. We also estimate the impact of a narrower subsidy expansion for families with an income up to 85% of national median income.

Complements to Work? Subsidies, Taxes, and Female Labor Supply

Yana Gallen
,
University of Chicago
Stephanie Karol
,
Office of Tax Analysis
Sejung Kim
,
University of Chicago
Dmitri K. Koustas
,
University of Chicago
Ithai Lurie
,
Office of Tax Analysis

Abstract

There is considerable debate about how to best support working mothers. In the United States, key transfers to working mothers occur through the tax system, namely the Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and the Child and Dependent Care Tax Credit (CDCTC), with the combined value of these programs totalling 184.4 billion dollars in 2019. In this paper, we provide new, unified estimates of the behavioral elasticities to each of these different tax policies. Expanding upon the approach common in the EITC-literature, we focus on large changes in state and federal generosity, and carefully construct treatment and control groups in a way that isolates the effect of each policy while controlling for other simultaneous changes in the tax code. We find that the CTC and other tax cuts in the early 2000s substantially increased female labor supply. The responses we estimate largely come from educated, middle-income mothers, and are of similar magnitude to the response of lower-income mothers following EITC expansions in the 1990s. In contrast, we rule out equally large responses to the CDCTC responses to changes in the CDCTC reflect confounding variation and are not present when we restrict to subgroups which experience only CDCTC changes. Our results should be useful to policymakers considering the impacts and distributional consequences of transfers administered through the tax system.

Discussant(s)
Juanna Joensen
,
University of Chicago
Yana Gallen
,
University of Chicago
Gabrielle Pepin
,
W.E. Upjohn Institute for Employment Research
JEL Classifications
  • J3 - Wages, Compensation, and Labor Costs
  • J8 - Labor Standards: National and International