Universal Childcare Subsidy Expansion and Maternal Labor Supply: Evidence from South Korea
*Names in bold indicate Presenter
Despite the importance of the subject in the policy sphere, the impacts and implications of universal childcare subsidy on maternal labor supply still remain largely unknown. Researchers agree that the costs, availability, and quality of a childcare facility are related to a mother’s decision to leave her child in another person’s care, but the causal link between childcare subsidies and women’s labor force participation has been investigated much less frequently. Only a handful of studies have examined the topic using quasi-experiments and found mixed results. More research is called for to improve our understanding of the maternal employment effect.
This study, therefore, aims to explore the impact of highly subsidized childcare on maternal labor supply and childcare utilization by taking advantage of a series of recent reforms that has taken place in South Korea. The country offers a unique case study suited to examine the research question put forward; in response to the growing concern over women’s low labor market attachment, compounded by low total fertility rates, the Korean government has introduced reforms between 2010 and 2013 that expanded the childcare subsidy across all income groups.
This study may inform current policy debates in thinking about effectiveness of subsidy that is no longer means-tested; the central and local governments currently altogether spend about 1% of the total GDP on childcare subsidy and the funding scheme places a heavy burden on local governments. Moreover, my research design addresses an identification problem that arises from the endogeneity between parental investment in childcare and mothers’ decisions to work in the labor market. In this light, the present study aims to make a both practical and methodological contribution.