Can a Government Subsidy for Childcare Encourage Maternal Labor Supply and Fertility? New Evidence From South Korea

Abstract

ABSTRACT We study the effects of a universal childcare subsidy (UCS) on maternal labor supply and fertility in South Korea, which has experienced sharp reductions in fertility rates. Our difference‐in‐differences and synthetic difference‐in‐differences approaches show little evidence that the subsidy increased maternal labor supply and total fertility rates. Additionally, there is no evidence of an effect on parents' welfare measured by subjective well‐being. Compared to studies on government childcare subsidies in Europe and North America—countries with relatively higher fertility rates—our study sheds new light that government subsidies for childcare may play a limited role in encouraging maternal labor supply or fertility in countries with high childcare costs.