Two steps forward - one step back? Evaluating recent child care policies in Germany

In August 2013, two child care reforms have come into effect at the same time: First, a legal claim to formal child care has been introduced for all children aged one year or older. Second, a new benefit called Betreuungsgeld has been introduced that is granted to families who do not use public or publicly subsidized child care. Both reforms target children of the same age group and both are unconditional on the parents income or employment status. In this paper, we present a structural model of mothers labor supply and child care choices that can be used to evaluate the joint effect of both reforms as well as the isolated effects if the two reforms had been introduced only one at a time. Our results show that the joint effect of both reforms is small but positive as far as mother s labor supply and the use of full-time formal care is concerned. The use of part-time child care is slightly reduced, however. This joint effect is the result of a relatively large positive impact on mothers labor supply as well as the use of formal child care of the legal claim for child care that is largely offset by a negative effect on both outcomes resulting from the introduction of the Betreuungsgeld .