Subsidizing private childcare in a universal regime

Abstract

All families in Finland have the freedom to choose between subsidized home care, universal public childcare, and private childcare. We study the impact of the introduction of private childcare subsidies in Finland. Private childcare subsidies have causal effects on take-up but no impact on home care or employment among women with small children. Instead, private services seem to crowd out public childcare. Private services have a socioeconomic gradient by mother’s education that steepens when the subsidy increases. Families’ preferences between home care, public childcare, and private childcare do not explain the result.