| Abstract: |
Leveraging the introduction of universal low-fee daycare in Québec in 1997, we
assess the welfare effect of universal childcare provision. First, using novel
data on local daycare coverage and a difference-in-differences design, we show
that positive impacts on maternal labor supply and childcare use are greater
in areas with larger daycare expansion, suggesting that childcare
availability, not just affordability, drives these responses. We then estimate
the policy's Marginal Value of Public Funds (MVPF), defined as the ratio of
beneficiaries' utility gains to net governmental costs. Unlike the standard
sufficient-statistics metric, which assumes a marginal change in fiscal
policy, we quantify the beneficiaries' utility gains through a model of
maternal labor supply and childcare choices. This allows us to relax the
common marginal-policy assumption and to incorporate non-pecuniary benefits
for parents. Our results indicate substantial welfare gains from universal
policies, with approximately $3.5 of benefits per dollar of net government
spending - over twice the amount captured by the sufficient-statistics metric.
Counterfactual simulations suggest that allocating more resources to
increasing availability, rather than improving affordability, could yield even
larger social returns. |