Effects of Childcare Policies on Fertility and Maternal Labor Supply: Focus on Endogenous Gender Power Within Households

ABSTRACT Previous studies have shown inconsistent results on the effects of the provision of childcare services on fertility and maternal labor supply. This study builds a dynamic collective labor supply model to analyze the effect of the increased availability of childcare services on fertility and maternal labor supply. Our model features the endogenous intrahousehold bargaining power of each household member and the power of each to veto having children. We find that intrahousehold bargaining power is a key determinant of whether the childcare policy is effective. Using country‐level panel data, we confirm the implication derived from our model. That is, the increase in childcare services is positively associated with the employment of mothers with small children only when their intrahousehold bargaining power is sufficiently high. This study's findings suggest the importance of considering intrahousehold bargaining power explicitly when evaluating family policies that intervene in the household's decision‐making.