Redistribution through services? The case of childcare provision in Germany

Over the past two decades, public childcare services have grown to comprise a larger share of family-related benefits than cash transfers in Germany. Using German Socio-Economic Panel data and administrative expenditure records, we apply a microsimulation model to integrate public childcare expenditure into household incomes. For families with children aged 0–6, childcare services reduce the Gini-coefficient by 2 percentage points, though absolute benefits are skewed toward higher-income households: the top quintile receives over 34 per cent more than the bottom quintile. Regional disparities remain pronounced. In West Germany, the top income quintiles received the highest benefit increase between 2010 and 2019, while in East Germany the first quintile gained most. Counterfactual estimations show that increasing average hours of use and attendance for under 3-year-old children among lower income quintiles leads to a more uniform distribution of childcare benefits. These findings highlight the inequality-reducing potential and regressive distributional patterns of childcare expansion.