Optimal Policy Design in a Dynamic Framework
Speaker: Hanna Wang (Barcelona School of Economics)
I develop and estimate a life-cycle discrete-choice model of fertility and female labor supply to study optimal design of a range of child-related policies.
First, I examine two recent German reforms which made parental leave payments wage-contingent and low-cost public childcare more widely available.
I find that both reforms increased completed fertility to a similar extent, but the parental leave reform did so in particular for highly-educated women.
Second, I solve for a budget-neutral optimal policy portfolio that maximizes fertility without decreasing overall welfare or fertility among highly-educated women.
I examine four prominent child subsidies and solve the problem under joint (pre-vailing) and individual taxation.
With the former tax regime, the solution raises fertility by 0.01 children (0.5%), while with the latter the gain is 0.16 (11.0%). Optimal subsidy parameters vary drastically by tax system, pointing to the need for joint design.
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