The distortionary effect of size and factor dependent policies: The role of factor substitutability in measuring the impact of a child-care subsidy policy in Chile
Resumen
In an effort to increase female labor participation in Chile, firms with more than 19 women must pay for childcare for the children of their female employees. We evaluate the effects of such policy using a model that features firm heterogeneity and three factors of production: women, men and capital. In our model the policy misallocates resources, driving firms to stop hiring once they are close to the threshold, depressing female participation and wages. We calibrate the model to the Chilean economy, and analyze via counterfactuals the effects of removing this distortion. First, we find that the policy reduces female labor participation by 1%, and wages by 2%. Second, the policy redistributes welfare from men to women, increasing female welfare by 0.05%. Third, we suggest alternatives policies that would be more successful at increasing female labor participation. For example, financing childcare with a tax on profits would increase female labor participation by 4%, with similar welfare consequences as the policy in place.
Materia
Country / Region
Fecha
2017-04-04Cite this publication
Autor
Escobar, DiegoLafortune, Jeanne
Rubini, Loris
Tessada, José
Metadatos
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