The paper simulates the impact of the proposed home care allowance for children of age 13- 36 months in Germany. We use the GSOEP to estimate a discrete choice model in which parents simultaneously decide on labor supply, usage of external day care and child care time within the family. The model also allows for possible rationing of external child care places. The simulation results on the basis of the estimated structural model indicate that the introduction of a home care allowance reduces labor supply and the usage of external day care. This effect dominates the impact of the simultaneous expansion in publicly funded day care which, in itself, leads the outcome variables in the opposite direction. The reform especially discourages external day care usage of low-income families, and therefore could contribute to keeping the most disadvantaged children away from early education.
Beninger, Denis , Holger Bonin, Julia Horstschräer and Grit Mühler (2010), Wirkungen eines Betreuungsgeldes bei bedarfsgerechtem Ausbau frühkindlicher Kindertagesbetreuung: Eine Mikrosimulationsstudie, IZA Standpunkte No. 31, Bonn. Download