Child care subsidies revisted
The choice between formal and informal care plays an important role in the overall impact of child care subsidies on labour participation. The model is calibrated to Dutch data.
Our analysis shows that existing child care subsidies have promoted labour participation. However, at the current average subsidy rate of almost 80%, a further increase in the subsidy rate is a rather ineffective way to promote formal participation, the main effect being substitution of informal for formal care.