Childcare Subsidies and Household Labor Supply

What would be the aggregate e§ects of adopting a more generous and universal
childcare subsidy program in the U.S.? We answer this question in a life-cycle equilibrium model with joint labor-supply decisions of married households along extensive and intensive margins, heterogeneity in terms of the presence of children across households and skill losses of females associated to non participation. We find that subsidies have substantial effects on female labor supply, that are largest at the bottom of the skill distribution. Fully subsidized childcare available to all households leads to long-run increases in the participation of married females and total hours worked by about 10.1% and 1.0%, respectively. There are large differences across households in welfare gains, as a small number of households - poorer households with children - gain significantly while others lose. Welfare gains of newborn households amount to 1.9%. Our findings are robust to differences among households in fertility and childcare expenditures.