CONTENT OUTLINE

01 Introduction

02 Methodology

03 Findings

04 Recommendations
 01.
INTRODUCTION
Rise of Child Care

Shift in gender norms — increasing number of

mothers in the working population

In Canada, the
In the United States, the In neither country has
employment rate of
share of mothers with this trend been offset by
mothers with at least
children under age 6 who a decline in the
one child younger than 6
work rose from 34% to proportion of
rose from 31% to 67%
56% from 1976 to 2004 working fathers
from 1976 to 2004
Rise of Child Care

Increasing
Gives rise to
More women Increasing reliance on
dual income
entering the maternal childcare to
and working
workforce labor supply bring up
families
children

Formal Child Care Informal Child Care

Usually unpaid care, provided by a
Regulated childcare provided away from grandparent of the child or by other
the child's home friends/relatives which is not covered by
official childcare regulations
Evaluation of publicly financed Child Care

If Child Care use does increase, how large is the associated increase in labor force
1. participation of parents, and what does it suggest the net cost of the policy

Recap:

Positive externalities generated

from Child Care (on children in
terms of development or human
capital skills and on parents in
terms of increase in labor force
participation)
Evaluation of publicly financed Child Care

If Child Care use does increase, how large is the associated increase in labor force
1. participation of parents, and what does it suggest the net cost of the policy

Recap:

Child Care subsidies can help to

eliminate the deadweight loss but
public systems require extensive
public funding which comes at a
cost of higher taxes
Evaluation of publicly financed Child Care

2.
Does public financing affect the quality or quantity of care provided, or does it just lead
to a substitution from one form to another

3. What effect does any change in Child Care (and associated increases in labor force
participation) have on child and family outcomes

The premise/assumption for the framework we have in class regarding Child Care policies is that
the Child Care provided is of high quality
 02.
METHODOLOGY
Quebec’s Family Policy

A childcare program to provide regulated childcare spaces to all children

aged 0-4 in Quebec at a parental contribution of $5.00 per day

Subsidized spaces for

$5.00 per day policy was preschool-age children came
extended to all 3-year-olds in in two forms:
1998, all 2-year-olds in 1999,
and all children aged less than 1. CPE Program
2 in 2000 2. Full time kindergarten &
subsidized after-school care
EFFECT OF POLICY

01.
The Family Policy emphasized an increase
in the quality of care

02.
Formal qualifications were raised for both
CPE & home-based caregivers

03.
New wage policies were implemented in
the sector
Effects on the Price of Childcare

Pre-Policy Change

• Direct subsidies for childcare were available for low-income families

• Refundable tax credits at a rate that depended on family income

Post-Policy Change

• Children in a $5.00 place are not eligible for further direct subsidy

• $5.00 parental contribution is not eligible or provincial tax credit for childcare expenses

• Effect of Family Policy on the effective price of childcare varies with income, little gain
for the lowest-income families but larger subsidies at higher incomes
Fig 3. -- Percent subsidy by province. Each data point represents a province-year mean of the percent
subsidy variable over the families in the simulation sample. For all provinces, the subsidy rate for two-
parent families is shown as well as the subsidy rate for Quebec singles.
Data

Primary data: National Longitudinal Survey of Children and Youth (NLSCY)

Provides information on: Sample Size: ~2000

• Childcare choices children at each age per
5 waves of biannual
• Tracking parental & year
surveys
(1994-95, 1996-97, 1998- teacher evaluations of
children’s Sample Restriction: include
99, 2000-01, 2002-03)
development, test only children from two-
scores & class rankings parent families
Empirical Strategy

• i = indexes individuals
• p = indexes provinces
• t = indexes years
• X_ipt = parents’ characteristics, size of urban area, no. of siblings, age & sex of the child

• Procedure produces intention-to-treat effects

• Allows some flexibility in deciding by which probability of treatment the ITT effects should be
scaled in order to arrive at the impact of treatment on the treated
• Disadvantage: Any Quebec-specific shocks coincident with the Family Policy will bias
our estimates
ADDRESSING CONCERNS

1. Enhance regression results with compelling graphical evidence of how our outcome
measures deviate in Quebec and the rest of Canada with the advent of the new policy

2. Run a variety of falsification checks on the results, such as examining effects among 8–11-
year-olds in Quebec (who were less affected by the policy) and controlling for
contemporaneous changes in economic conditions

3. Standard errors: To account for the fact that the policy variation we use is at the province-
year level, we report robust standard errors clustered on province-year cells to account
for any dependence of the errors within province-year groups
 03.
FINDINGS
 Effects on Childcare Use

Odds of a child in childcare rose by 14.6 percentage points

in Quebec relative to rest of Canada

Rise in institutional care is equals to overall rise in

childcare use

No Change in home care or any other in-home care

Results are puzzling as CPE increased the number of

home-based care à Disaggregate care in other homes
Dummy Indicator: ELIG for observations in Quebec in
wave 4 and 5 Deduction: There was a shift from care provided by
relatives and non-licensed non-relatives to care provided
Percent Subsidy: Province-year Subsidy rate by licensed non-relatives
 Introduction of policy à p falls à c will increase à pivotal
shift of the budget constraint

What happens to time spent with children?

Depends on whether substitution effect or income effect

dominates
Effects on Labor Supply

- Rise in women employment in Quebec by 7.7 percentage

points (coincides with maternal time allocation we learned
in class) à Substitution effect dominates here

- Impact on labor is only about half as large as impact on

childcare use

- 2 possible explanations: (1) many women using childcare

without working (2) change in reporting (women might
have put ‘no’ when child is in informal care then ‘yes’
when child is in formal care

- Assuming child needs care when mother works, this

means 1/3 of the 14.6% is unreported childcare use shifts
Effect on Childcare Use and Labor Supply

- Increase in childcare use and shift from informal

childcare to formal childcare

- Not just an instrument to increase childcare use,

but to increase labor supply with a shift in modes
of childcare

- Policy increased the usage of quality childcare,

which in class we have learnt might lead to positive
externalities on children in terms of their
development and human capital skills
Children Outcomes
• The policy has a net detrimental effect on the children
across a range of behavioral and health outcomes of
the young children
• Significant behavioral and health outcomes include
• Emotional disorder-anxiety
• Physical aggression and opposition
• Standardized motor and social development
• Excellent Health
• Throat and ear infections before age 2
 Difference-in-differences
Motor and social-
development score

Data from the study found that

β2 = 1.647, which is more
than 10% of a standard
β2
Treatment deviation and statistically
significant, implying that
there is a significant
deterioration to the
children’s motor and social
development abilities
Control Group

Wave 1 Wave 5
Parent Outcomes
• Data was gathered to observe if there were any changes in parents’ well-being as
well as the quality of parental outcomes as a result of the induced labor supply and
increased use of child care

• Quality of parental outcomes is determined by the following:

• Hostile and ineffective parenting
• Parental consistency
• Aversive parenting

• Parental well being was gathered via a self-assessment

Quality of Parental outcomes

Hostile-Ineffective Consistent Parenting Aversive Parenting

Parenting
8.7% rise in Hostile-Ineffective 2.4% decline in Consistent Negligible relative difference in
Parenting index Parenting index Aversive Parenting index
Parent Wellbeing
• Overall, there is a deterioration in the health
of both mothers and fathers during the
period the policy was introduced
• There was a 2.9% lower chance fathers are
reported in excellent health
• As for mothers, mental wellbeing took a dip
as mother’s depression score increased by
0.422, 9.2% of a standard deviation
• Spousal relationships also fell 11.6% of a
standard deviation
 Difference-in-differences
Parent’s
depression score

Data from the study found that

β2 = 0.011, for mothers, and
0.029 for fathers (statistically
β2 significant, implying that
Treatment
while the maternal labor
supply increases and
children are provided child
care, the health of both the
fathers and mothers are
Control Group deteriorating.

Wave 1 Wave 5
 Negative Externalities of the Policy

Price S = PMC = SMC

• The worsened children and

EMC parental outcomes creates an
external marginal cost and
P*Market
therefore a divergence between
the PMB and SMB
DWL

D = PMB • The study therefore shows that

Overconsumption
there is an overconsumption of
the provided child care.
SMB = PMB - EMC

Formal Child
Q*SOCIAL Q*Market
Care Hours
 04.

RECOMMENDATIONS
Recommendations (1)

(Lefebvre and Merrigan, 2008)

Usage of Survey of Labour and Income Data (SLID) data over National Longitudinal
Study of Children and Youth (NLSCY) data

• SLID obtains more precise income and labor force statistics of working
individuals, as compared to NLSCY which focuses more on children's
outcomes

• SLID data is collected and published annually, while NLSCY utilizes data in
lengthier cycles. Using SLID would therefore result in a more precise
identification of different pre-policy trends in labor supply across regions
Recommendations (2)

Expansion of the study from short to long term

• The study showed that there is a strong shift into new childcare use, an increase in
maternal labor supply at the cost of worsening children outcomes
• However, whether these findings hold true in the long-run is ambiguous
(Havnes and Mogtad, 2011)
• If parents value the increase in income as a result of the increase in labor
supply over the change in children outcomes, then the findings hold true in
the long run
• If parents value the higher levels of children outcomes higher, then we will see
a reversal of the trend, and parents would choose to forgo the newly provided
childcare, and reduce their labor supply

• An expansion of the study into the years following the new childcare policy is
required to explore the long run reactions to the policy
• It must be noted that in the years following, there were multiple additional childcare
and labor supply policies which may confound the findings
Recommendations (3)

Greater emphasis on the mental wellbeing of parents

• (World Health Organization, 2018)

Caregivers with poor mental wellbeing are significantly less likely to engage in
interactive and positive parenting practices

• (Lippold et al, 2016)

The long-term effects of inconsistent parenting resulted in higher youth
substance abuse, delinquency, internalizing problems and physical health problems.

Ø Increase support for parents

o Provision of therapy/workshops
Ø Increase parent involvement/interaction:
o Reading with your children, helping with homework, attending school activities
Recommendations (4)

Greater emphasis on the quality of early childhood programs

• (Karoly and Bigelow, 2005)

Children enrolled in high-quality early learning programs are less likely to require:
o Special education assistance during their K-12 years,
o To commit juvenile offenses,
o And are more likely to graduate from high school in the short to medium term.
o In the long run, children who participate are more likely to be employed and less likely to
need government assistance.

• (Yoshikawa et al, 2013)

When early childhood programs are of excellent quality, the positive impacts are
stronger and more likely to last.
Recommendations (5)

Further research on the effects of informal childcare on maternal labour supply and
children's outcomes

• The article mainly investigated on the effects of increase in formal childcare on

maternal labour supply and the effect on child outcomes

• (Li et al, 2020)

Informal care resulted in:
o Mothers approaching parenting with more positivity
o Children's higher ability to regulate their social-emotional wellbeing
• (Compton, 2013)
Living proximity to a grandparent is positively related to maternal labour supply in
Canada
THANK YOU!