Budapest Working Papers on the Labour Market BWP - 2017/3
Evidence from single country studies suggests that the effect of subsidized childcare availability on maternal labor supply varies greatly by institutional context. We provide estimates of the childcare effect around age 3 of children for 7 EU countries, based on harmonized data and the same quasi-experimental methodology, and evaluate their cross-country variation in light of key institutional factors (leave policies, labor market characteristics, cultural norms). The identification of the childcare effect utilizes birthdate-based kindergarten eligibility cutoffs specific to each country in an instrumental variables approach. We combine data on mothers from the EU-LFS, eligibility cutoffs gathered from country experts and verified using further datasets, and country-level institutional characteristics from various sources. We discuss the role of the context, timing, and the point of estimation. The results suggest that the childcare effect is the highest in CEE countries, where at this child age, maternal participation is still relatively low compared to that of mothers with older children, and leaves with job protection are just ending. We find less evidence of an impact in Southern EU countries, where leaves end at a much earlier age, and maternal participation at older child ages is low. Western EU countries also show some impact, despite the already high maternal participation rates prior to this age. Specific policy implications are derived from the results in light of the EU Barcelona targets for childcare expansion under age 3.