Browsing by Author "Ahtonen, Hanna"

In Finland home care of small children is supported with a child care allowance. Additionally to the home care allowance some municipalities pay voluntary municipal supplement to the child home care allowance. This study examines municipal characteristics or circumstances that could explain the decision to implement a municipal supplement. The research question question is why do municipalities pay municipal supplement? As an incentive for child home care for the parents, the municipal supplement can have impacts on the parents' labour force participation as well as children's well-being and development. Hence, it is important to study how municipalities decide about the supplement, as this policy has straight impacts to the municipality's citizens, their well-being and the municipal economy through the labour market and child outcomes. The data set for this study contains data about municipal supplements and information about municipal characteristics in Finnish municipalities from 1994 to 2012. Municipality-year observations are used for two regression models one for explaining the binary decision to pay or not to pay the municipal supplement and the other for explaining the generosity of the supplement. To analyse these municipal fixed effects regression models are used. The possible explanatory variables chosen are characteristics that describe the economic state of the municipality, the labour market situation, the pressure in childcare and the party shares in municipal councils. The results show that it seems that the economic situation within a municipality (especially the municipal income tax rate) and the pressure in daycare do have some correlation with the municipal supplement. However, these findings do not carry over all of the robustness analysis for different data periods in time. The reason behind this might be that there are some time variant changes that are not discovered, for example the overall economic situation. Also, the model probably suffers from endogeneity as the variables are likely to correlate with each other. Therefore, causal interpretations are not made. On the other hand, the results showed quite strong evidence that the mothers' labour force participation does not have any association with the municipal supplement. Also, from the political parties have little association with the supplement policy as only the Finns Party had some correlation with the supplement policy. This finding did not yet carry over all of the robustness analysis. In conclusion, this study does not find statistically significant explanatory factors for the municipal supplement policy.