Childcare: financing supply or demand? An introduction European Social Services Conference, Barcelona June 21 st -23 rd Luca Beltrametti (Dept. Economics, University of Genoa, Italy)

A very general framework : “in markets we trust” –welfare is bad for growth, but if you like it and you can afford it… : financial crisis –Markets not always perfect –Maybe some unemployment program not so bad : fiscal stimulus –A keynesian revival (social expenditure helps!) 2010: sovereign debt crisis –Fiscal responsibility is good (and welfare is costly) –No fiscal sustainability without growth ==> we like welfare especially if it enhances growth

Do we need childcare? Reduce child poverty and disadvantage –Ethical principles/social cohesion –do not waste talents (efficiency argument) Female labour supply –Gender equality –Do not waste growth potential Fertility –Medium term growth and sustainability

Reduce child poverty and disadvantage Oecd “Doing Better for Children” (2009), concludes that: –“Governments should invest more money on children in the first six years of their lives to reduce social inequality and help all children, especially the most vulnerable, have happier lives…”

Increase female labour supply Supporting growth by increasing employment of women Women with children decrease their participation to labour force (see next slide) –just changing preferences –…or binding constraints?

Fertility Childcare ==> more women at work But what about fertility? –“Old” paradigm: more women at work ==> lower fertility (e.g. Mediterrenean countries in the ‘50) –New evidence: more women at work ==> higher fertility (income effect?)

Public spending for families in cash, services and tax measures, in percentage of GDP, in 2003 Source: OECD (2007), Social Expenditure Database (

Financing supply of childcare Direct public provision of services –Rigid supply? –Short hours? –Costly? Public financing + private provision –Public regulation –Administrative selection of providers In both cases families might: –Choose the provider –Co-pay Workplace solutions with fiscal support for firms (see recent ILO book)

Financing demand Unconditional support –Cash transfers and/or tax breaks towards families Direct support to families’ income (depending on composition…) Not sure that children are final beneficiaries Uncertainty about quality of care provided Irregular workers? Conditional support –Fiscal reductions on documented childcare expenses Liquidity constraint (ex-post reimbursement) Administrative costs Control on final beneficiary (==> political viability?) –Vouchers Ex-ante funding Administrative costs Trackability of final use of resourches (who, what, when, where…) Ex-ante control on quality

Final remarks on supply vs demand financing Policies financing supply and demand are NOT alternative but may be complementary E.g.: if hours in public childcare services are rigid and short ==> financing demand helps making more flexible care mix Judgment on vouchers should be not generic and “ideological” but case specific –E.g: vouchers for childcare: Services are “simple”, reiterated and of direct experience ==> sensible to give freedom of choice to families (low asymmetries in information, good learning…) free entry in the market and low capital needed ==> reasonable to assume (at least in urban contexts) that demand activates competition among several providers