Child Care Policies in a Majority Voting Equilibrium

This paper develops a model of households' choices regarding child care and their policy preferences. Households dier in the level of female human capital that aect both earnings and the quality of child care at home. Child care at home incurs the costs of not only the foregone wages but also wage reductions when returning to the labor market. By sending children to child care centers one can avoid such wage losses at a price. Taking all these factors into account, households also choose the optimal timing of child birth and their preferred policy: the allocation of a given budget between subsidizing child care centers and supporting child care at home. We show that households with relatively low levels of human capital prefer subsidies to home care and choose home care and that households with relatively high levels of human capital prefer subsidies to child care centers and choose child are centers. Interestingly, households in the middle may prefer either one of the policies but end up choosing the subsidized child care. We also characterize the theconditions under which either of the two policies are supported in equilibriumwith majority voting. Higher level of median human capital, lower cost of child care centers, higher costs of career interruption tend to result in the market care regime that subsidizes child care centers with no subsidies to child care at home.