Childcare Subsidies, Labor Supply, and Household Decisions

Session Submission Type: Panel

Abstract

This session examines how variation in childcare-related policies across U.S. states shapes family well-being, labor supply, and household decision-making. Combining rigorous empirical analysis with insights into family behavior and lived experiences, it highlights how differences in childcare supply, subsidy design, and tax policy generate unequal access to care and divergent economic outcomes. Together, the four papers offer a comprehensive view of how policy design and local constraints jointly shape childcare access and its economic consequences.
The first paper provides new evidence on how childcare availability and costs influence maternal labor market outcomes across five New England states. Using highly granular data, it shows that increased childcare supply—especially home-based care—and lower costs significantly boost mothers’ labor force participation, with important heterogeneity across income, education, and regions. This underscores how state-level differences in childcare markets translate directly into employment opportunities for women.
The second and third papers focus on childcare subsidies in Wisconsin, offering a rich and policy-relevant perspective on how program rules and on-the-ground constraints shape families’ experiences. The second paper examines the interaction between child support and childcare subsidy eligibility, documenting how income thresholds and administrative linkages between programs can generate instability. Because child support payments are often irregular, families near eligibility cutoffs may experience frequent and unpredictable changes in subsidy receipt. Using both administrative data and in-depth interviews, the study shows that such volatility can lead to disruptions in childcare arrangements, employment instability, and broader financial strain. These findings highlight how the coordination—or lack thereof—between programs can amplify economic insecurity, even when each program is well-intentioned in isolation.
The third paper complements this analysis by showing that eligibility for subsidies does not guarantee access to childcare. Drawing on qualitative evidence, it documents multiple structural barriers that prevent families from utilizing available subsidies, including limited supply for nonstandard work hours, geographic constraints in rural areas, and insufficient support for children with disabilities. Particularly striking are accounts of families with children with disabilities who, despite being eligible for subsidies, are unable to find providers willing or able to serve their children, effectively rendering these benefits unusable. The paper emphasizes that these access constraints are not randomly distributed but vary systematically across local contexts, reinforcing disparities across regions and populations. 
The fourth paper examines how federal tax policy—specifically the Child and Dependent Care Credit (CDCC) —interacts with household decision-making and social norms around childcare responsibility. Moving beyond standard labor supply effects, it focuses on how reductions in childcare costs affect intra-household bargaining and the relative consumption between partners. The paper develops a model in which social norms shape childcare responsibilities when bargaining breaks down and shows that policy impacts depend on these norms. Empirically, it uses policy-driven variation in childcare costs to demonstrate that household spending on women’s clothing increases relative to men’s in families that benefited from the expansion of CDCC.

Policy Area

• Family and Child Policy

Chair

• Leslie Hodges, USDA - Economic Research Service

Discussant

• Rahmat Husein Andri Ansyah, University of Massachusetts at Boston

Organizer

• Danyang Zhang, New Mexico State University

Individual Presentations

• Childcare and Women’s Employment Outcomes: Evidence from Five New England States - Non-Presenting Co-Author: Maria J Luengo-Prado, Instituto Complutense de Analisis Economico; Presenting Author: Bo Zhao, Federal Reserve Bank of Boston

• "It’s Like Playing the Lottery": (Ir)Regularity of Child Support and Child Care Subsidies - Presenting Author: Molly A Costanzo, University of Wisconsin-Madison; Non-Presenting Co-Author: Lisa Klein Vogel, University of Wisconsin-Madison; Non-Presenting Co-Author: Hanna Han, University of Wisconsin-Madison; Non-Presenting Co-Author: Alexis M Dennis

• Subsidies but No Access: Families’ Experiences of Barriers to Using Child Care Subsidies in Wisconsin - Presenting Author: Lisa Klein Vogel, University of Wisconsin-Madison; Non-Presenting Co-Author: Molly A Costanzo, University of Wisconsin-Madison

• Who Pays for Childcare? Social Norms, Household Spending, and the Child and Dependent Care Credit - Presenting Author: Danyang Zhang, New Mexico State University