Parental Allowance Increase and Labor Supply: Evidence from a Czech Reform
We study the effect of a CZK 80,000 (36%) increase in parental allowance, a universal basic income-type benefit, on the labor supply of parents of young children in the Czech Republic. Drawing a parental allowance does not preclude labor market activity, which allows us to study the income effect. The reform led to a 6 percentage point (15%) decrease in labor market participation of mothers of young children. The effect is particularly strong among mothers with only one child (10 p.p., 28%) and among university-educated mothers (16 p.p., 36%). We observe a virtually identical reduction in hours worked. We found no effect on the labor supply of fathers of young children.
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