Essays on Labor Supply and Public Policy

This dissertation consists of three essays that advance our understanding of how public policies shape employment and careers. In the first essay, I examine how the tax treatment of families – that is, whether couples are taxed on the basis of their joint or individual incomes – shapes married women's labor market choices. The second examines how access to public childcare affects parents' labor supply and earnings over the life cycle. The third studies how childcare affects children's long-term outcomes and intergenerational mobility.

The dissertation’s main findings are as follows:

The dissertation focuses on policy reforms implemented in Finland in the 1970s. The shift from family or joint taxation to individual taxation in 1976 significantly improved women’s  economic incentives to participate in the labor market. The childcare law of 1973 made the provision of childcare mandatory for municipalities and provided a mechanism for government funding of childcare. After 1973, government funded childcare grew at a rate of 5,000 spots a year.

The dissertation finds that the shift from family to individual taxation increased women’s employment. While income taxation is based on individual earnings in most OECD countries, some large economies, including the United States, Germany and France, base taxation on couples' joint incomes. The question of how to tax families remains an important policy question: Switzerland decided to shift from joint to individual taxation earlier this year. The results suggest that the tax treatment of families can help explain gender differences in employment rates across countries.

For the childcare reform, the findings suggest that access to public childcare can have substantial effects on parents’ careers. The effects on parents’ earnings remained positive even after their children reached school age and persisted until retirement. These results are consistent with the idea that parents may have been able to use the increased labor supply when their children were young to accumulate human capital and progress in their careers.

The findings for children indicate that public childcare equalized differences in earnings, educational attainment and social and academic skills between children from different family backgrounds.

Contact Juuso Mäkinen

Email: juuso.p.makinen@aalto.fi