Money for nothing? Universal child care and maternal employment

The strong correlation between child care and maternal employment rates has led previous research to conclude that affordable and readily available child care is a driving force both of cross-country differences in maternal employment and of its rapid growth over the last decades. We analyze a staged expansion of subsidized child care in Norway. Our precise and robust difference-in-differences estimates reveal that there is little, if any, causal effect of subsidized child care on maternal employment, despite a strong correlation. Instead of increasing mothers' labor supply, the new subsidized child care mostly crowds out informal child care arrangements, suggesting a significant net cost of the child care subsidies.

Research Highlights
► A large body of descriptive evidence suggests that child care availability is a driving force of maternal employment.
► We analyze a staged expansion of subsidized child care in Norway using difference-in-differences.
► We find little, if any, causal effect of subsidized child care on maternal employment.
► The new subsidized child care mostly crowds out informal child care arrangements.
► This suggests a significant net cost of the child care subsidies.