Evaluation of childcare cash policy on fertility in Norway

Arnstein Aassve, Università Bocconi
Trude Lappegård, Statistics Norway

In 1998 a new cash benefit for parents of small children (aged 1-2 year) was introduced in Norway. Its purpose was to provide cash payment to parents who either preferred to care for their children at home or to compensate those who were not offered external childcare provision. It has been argued that the new policy encouraged women to stay at home with their children, possibly reducing labour supply. The policy was consequently considered gender biased, creating reduced incentives for women to participate in the labour market and therefore encouraging a more traditional division of labour of husbands and wives. Given this background of the policy, we evaluate whether there has been a change in mothers fertility timing after introducing the childcare cash benefit. We think there are reasons to believe that there is a policy effect on mother's fertility timing, i.e. speed up the process of having another child while receiving the cash benefit. Analyses are based on data from Norwegian registers before and after the cash benefit was introduced. In this paper we are interested in assessing whether the introduction of the policy lead to increased fertility. We do so by implementing a Difference-in-Difference analysis whereby we consider Norwegian mothers’ fertility decisions before and after introducing the new cash benefit, and evaluate whether there has been a policy effect on child spacing. The approach follows recent contribution in labour economics.