Care or Cash? The Effect of Child Care Subsidies on Student Performance

Given the wide use of childcare subsidies across countries, it is surprising how little weknow about the effect of these subsidies on children’s longer run outcomes. Using asharp discontinuity in the price of childcare in Norway, we are able to isolate the effectsof childcare subsidies on both parental and student outcomes. We find very small andstatistically insignificant effects of childcare subsidies on childcare utilization andparental labor force participation. Despite this, we find significant positive effect of thesubsidies on children’s academic performance in junior high school, suggesting thepositive shock to disposable income provided by the subsidies may be helping to improvechildren’s scholastic aptitude