Are there any effects of the cash for care policy on female employment in Sweden?

This study focuses on the effects of the cash for care policy (CFC, in Swedish vårdnadsbidrag) on female employment in Sweden. The CFC was introduced in Sweden in 2008. It consists of a flat-rate sum paid by the municipalities to parents of children between age one and three, who decide to provide care for their children and do not use publicly subsidized daycare. The policy has been the object of heated political and social debates. The main object of the reform is increasing parents’ “freedom to choose”, but the policy is also feared to be a “housewife trap” by those opposing the reform. The study provides an overview of the use of CFC during the first years since its introduction, and an estimate of short-term effects of the use of CFC on female employment. Since it is voluntary for the municipalities to adopt the policy, municipalities have been analyzed as in a quasi-experiment, where some have been “treated” with the CFC policy, and some have not. First, female employment trends in similar types of treated and control municipalities were compared. Secondly, linear regressions were used to estimate the effects of the CFC policy on changes in female employment rates after the introduction of the policy, controlling for various characteristics of the municipalities such as: urban/rural areas, shares of highly educated women, shares of low educated women, shares of foreign-born women, total fertility rates. The study shows that, in general, the municipalities that offered the policy had higher female employment rates than the municipalities that did not offer it. Nevertheless, in rural areas the adoption of CFC had negative effects on female employment. On average, in rural areas female employment growth rates relative to years 2007-2012 in municipalities offering the policy were 2.42 percentage points lower than in control municipalities, all else being equal. Negative effects of CFC on female employment in municipalities with high shares of low educated women, high shares of foreign-born women and high fertility rates were not confirmed. The CFC policy has been recently adopted, mostly in urban municipalities and the proportion of parents that used CFC has been relatively low. Long terms effects of CFC on female employment will likely be dependent on whether the policy will be more widely used in the future and where