Childcare Subsidies and Child Skill Accumulation in One- and Two-Parent Families

Abstract

I examine the role of family structure and childcare subsidies in child skill accumulation. I establish empirically that skill accumulation is more responsive to childcare price for one-parent families than for two-parent families. I analyze the effects of childcare subsidies in a model featuring endogenous family formation, parental altruism, and a baseline subsidy resembling that of the United States. I find that eliminating this subsidy generates welfare losses of 1.63 percent of lifetime consumption, that equilibrium adjustments act to mitigate these losses, and that increasing uptake among one-parent families yields the highest welfare gains per additional recipient. (JEL I21, I26, J12, J13, J24)