Life-cycle and intergenerational effects of child care reforms

Abstract

We investigate the importance of various mechanisms by which child care policies can affect life-cycle patterns of employment and fertility among women, as well as long-run cognitive outcomes among children. A dynamic structural model of employment, fertility, and child care use is estimated using Norwegian administrative data. The estimation exploits a large-scale child care reform, which provided generous cash transfers to mothers who did not use formal child care facilities. We find that the reform generates sizable changes in employment and fertility decisions, especially among low-education women. We then use the mothers' unobserved heterogeneity in the structural model as a control fun..