Childcare Costs and the Demand for Children – Evidence from a Nationwide Reform

Exploiting the exogenous variation in user fees caused by a Swedish childcare reform, we are able to identify the causal effect of childcare costs on fertility in a context in which childcare enrollment is almost universal, user fees are low, and labor force participation of mothers is very high. Anticipation of a reduction in childcare costs increased the number of first and higher order births, but only seemed to affect the timing of second births. For families with many children we also find a marginally significant negative income effect on fertility.