1. Family policies
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

2. What are we talking about?
For parents labor supply, leisure and child care decision are interdependent
Family policies:
Parental leave facilities
Childcare arrangements
Tradeoff: female labor force supply & fertility
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

3. Overlaps with other institutions
Regulation of working hours
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

4. Outline Measures and cross-country comparison Theory
Empirical evidence
Policy issues
Why do family policies exist?
Review questions
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

5. Cross-country comparisons
Measures
Formal childcare arrangements: government supported or market based
Duration of maternity leave
Maternity benefits
Total duration of maternity and childcare leave
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

6. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

7. Cross-country comparison
Cross-country comparisons
Cross-country comparison
Large differences in the use of formal childcare arrangements for young children (< age 3): Austria <5%, Denmark: >50%
Many European countries: child care use age  3 close to 100%
Large differences in parental leave
Duration: 1 year (Finland, Sweden), no leave (Australia, New Zealand, US)
Benefits: <50% (UK), 100% (many countries)
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

8. Cross-country comparison II
Cross-country comparisons
Cross-country comparison II
Different combinations of paid leave enabling parental childcare & subsidies supporting non-parental childcare:
Germany: emphasis on paid parental leave
US: more generous support for childcare
Scandinavian countries: support for both & choice to the parents
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

9. Theory childcare facilities
Static labor supply framework – mother maximizing utility
Childcare provision:
Fixed costs: shifts income curve
Variable costs: rotates income curve
Childcare subsidies:
Stimulate participation
Increase working hours
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

10. Childcare provision: fixed costs
Theory
Childcare provision: fixed costs
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

11. Childcare provision: variable costs
Theory
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

12. Theory
Theory parental leave
Parental leave often equivalent to maternity leave
Form of subsidized childcare – subsidy not provided to external services but to the parents who are providing child care themselves
Positive effect on labor supply of mothers
Negative effect on labor demand (wage costs increase)
Female wages go down – employment effects?
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

13. Theory w L1S L1D L2D L2S w1 w2 L1 L L2
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

14. Empirical evidence
Empirical evidence
Employment rate of women strongly affected by presence of children in some but not all countries
Lone mothers higher-lower employment rate than mothers who are part of a couple
Part-time work among female employees increases with the number of children – except in Denmark and Portugal
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

15. Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

16. Box 7.1 Mothers with young children in France Piketty (1998)
Empirical evidence
Box 7.1 Mothers with young children in France Piketty (1998)
France 1986 policy to help parents raise children (APE): allowance 40% minimum wage for mother of at least 3 children, one of whom was younger than 3, 1994: also for mothers of at least 2 children. Effect on employment rates of mothers
Children
Child < 3
APE
1994
1997   2
yes no 59 47
–12 1 62 64 +2
–14 3 31 34 +3
–15 68 69 +1
–13
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

17. Box 7.2 Child care and hours of work in Norway Naz (2004)
Empirical evidence
Box 7.2 Child care and hours of work in Norway Naz (2004)
Norway 1998: cash benefits for parents with 1- to 3-years old children who did not use state-subsidized day-care facilities; effects on number of weekly working hours:
Children age 1 to 3
Children age 3 to 6
Before
After  
Mother
24.4
23.7
–0.7
24.5
26.5
2.0
–2.7
Father
40.9
41.3
+0.4
40.8
0.0
Total
65.3
65.0
–0.3
67.3
–2.3
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

18. Policy issue 1: Can work and family life be balanced?
Policy issues
Policy issue 1: Can work and family life be balanced?
Issue related to promotion of female employment rates
It also touches upon the quality of childcare
Should governments subsidize cost of raising children without favoring market costs for childcare over the forgone earnings cost of a parent who stays home to care for a child
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

19. Policy issue 2: Is there a trade-off between fertility and employment?
Policy issues
Policy issue 2: Is there a trade-off between fertility and employment?
Employment policies interact with cultural and social customs
Some countries limited use of external childcare facilities because of social stigma related to sending children to these facilities
Economic terms: fixed – psychological – costs related to the use of childcare
Cross-country: positive relationship between fertility and employment rates of prime-age women
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

20. Change over time in the correlation work-fertility

21. Policy issues
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

22. Policy issues
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

23. Why do family policies exist?
Policy issues
Why do family policies exist?
Government intervenes – existence of imperfections in the market for childcare:
Imperfect information about the quality
May lead to moral hazard and adverse selection
Subsidies targeted at high-quality childcare may induce parents to opt for this care
Without subsidies level of childcare may be sub-optimal
Externalities: high-quality childcare  lower costs to society because of more educated individuals
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

24. Review questions
Why could it be welfare improving if governments subsidize child care facilities?
How does parental leave affect employment and wages?
How could subsidies influence the choice between formal and informal child care?
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.

25. Practicing with real data
Box 7.2: The impact of cash benefit reform on parents’ labor force participation (pag )
A Stata data file with the Naz (2004)dataset, a do file and a log file are available at the website:
Source: Tito Boeri and Jan van Ours (2008), The Economics of Imperfect Labor Markets, Princeton University Press.