Price of High-quality Daycare and Female Employment

Using local variation between municipalities, I analyze the degree to which the price of high-quality publicly subsidized childcare affects female employment following maternity leave. Importantly, prices are income dependent and thus likely endogenous, yet by exploiting information on minimum income compensation during non-employment, I bypass this problem. The results show that the price negatively affects employment. A price increase of €1 per month decreases employment by 0.08%, which corresponds to a price elasticity of -0.17. These effects prevail during the first 12 months after childbirth. I also find that availability of childcare increases employment. Copyright © The editors of the "Scandinavian Journal of Economics" 2010 .