This study investigates whether the possibility of engaging in householdchildcaremayexacerbatetheincentivesofparentsandgrandparentsto falsely claim disability beneﬁts. I present an efﬁcient implementation case for subsidizing formal child care costs of the disabled and propose an implementation of the optimal scheme that consists of capped formal day care subsidies, non-linear income taxation and asset-testing. I calibrate a multigenerational family model with persistence in privately observed shocks to matchkeyfeaturesoftheUSlaborandchildcaremarkets,andﬁndthatday care subsidies may lead to sizeable cost savings.
Social insurance, day care subsidies, multi-member family
Income Distribution | Insurance
Optimal social insurance with informal child care. (2017). 1-49. Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/2067
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