Having it all, for all: child-care subsidies and income distribution reconciled

Barigozzi, Francesca, Cremer, Helmuth and Roeder, Kerstin (2019) Having it all, for all: child-care subsidies and income distribution reconciled. TSE Working Paper, n. 19-1005

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Abstract

This paper studies the design of child-care policies when redistribution matters.
Traditional mothers provide some informal child care, whereas career mothers purchase full time formal care in the market. The sorting of women across career paths is endogenous and shaped by a social norm about gender roles in the family. Via this social norm traditional mothersinformal child care imposes an externality on career mothers, so that the market outcome is inefficient. Informal care is too large and the group of career mothers is too small so that inefficiency and gender inequality go hand in hand. In a first-best, full information word redistribution across couples and efficiency are separable. Redistribution is performed via lump-sum transfers and taxes which are designed to equalize utilities across all couples. The efficient allocation of child care is obtained by subsidizing formal care at a Pigouvian rate.
However, in a second-best settings, we show that a trade-off between the reduction of gender inequality and redistributive considerations emerge. The optimal uniform subsidy is lower than the Pigouvianlevel. Under a nonlinear policy the first-best Pigouvianrule for the (marginal) subsidy on informal care is reestablished. While the share of high career mothers continues to be distorted downward for incentive reasons, this policy is effective in reconciling the objectives of reducing the child care related gender inequalities and achieving a more equal income distribution across couples.

Item Type: Monograph (Working Paper)
Language: English
Date: April 2019
Uncontrolled Keywords: Child care, womens career choices, child care subsidies, redistribution, social norms
JEL codes: D13 - Household Production and Intrahousehold Allocation
H23 - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
J16 - Economics of Gender; Non-labor Discrimination
J22 - Time Allocation and Labor Supply
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 16 Apr 2019 12:31
Last Modified: 16 Apr 2019 12:31
OAI ID: oai:tse-fr.eu:122917
URI: http://publications.ut-capitole.fr/id/eprint/32349

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