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Households’ responses to price changes of formal childcare.

Andersland, Leroy; Nilsen, Øivind A.
Working paper
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URI
http://hdl.handle.net/11250/2427574
Date
2016-12
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  • Discussion papers (SAM) [578]
Abstract
The current understanding about how households respond to price changes in formal

childcare is not extensive. This study examines this response through a 1998 reform in

Norway that introduced a money transfer to families who did not send their child to

childcare. This cash-for-care reform raised the price of formal childcare relative to its

alternatives by about 115% for 1–2 year olds but not 3–5 year olds. Using household

surveys conducted before and after the reform the analysis reveals that childcare attendance

fell by 13.7 percentage points because of the reform. The results also indicate

that the most important alternative to formal childcare is parental care. Furthermore,

households of low socioeconomic status are more price sensitive, with the main

substitute mode of care for this group being parental/relative care, whereas for high

socioeconomic status families the substitutes include day parks and nannies as well as

parental care.
Publisher
Institutt for samfunnsøkonomi, NHH
Series
DP SAM; 20

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