Universal Daycare and Mothers' Working Lifetime

Layer 1: Overview

This paper estimates the causal effects of universal daycare access on mothers’ labor force participation, full-time employment, hours worked, and earnings across 34 years after the birth of their first child — the longest window examined in this literature. The motivation is twofold: the existing evidence base is overwhelmingly short-run, and the human capital channel (reduced depreciation of skills, accumulation of experience) implies that early labor market attachment during child-rearing years could compound over decades in ways that short-run estimates miss entirely.

The identification exploits Denmark’s 1964 reform that converted a targeted (means-tested) childcare system into a universal one, which triggered a staggered geographic roll-out of daycare centers from 1966 onward across the country’s 2,033 neighborhoods nested in 277 municipalities. The paper combines digitized historical daycare yearbooks (1964–1975), the 1970 census, and administrative registers from Statistics Denmark covering 370,602 mothers who had their first child between 1964 and 1975. Employment is measured via annual contributions to the Supplementary Pension Fund (ATP); earnings from tax records are available from 1980 through 2015, adjusted to 2016 USD. The empirical strategy is a difference-in-differences design comparing mothers in neighborhoods with versus without daycare within the same municipality over time. Daycare availability when the first-born child turns four is used as the fixed treatment indicator for the long-run regressions. Municipality fixed effects absorb cross-sectional confounders; year-of-first-birth dummies capture macro trends.

The contemporaneous effects are already substantial. Once year and municipality fixed effects and covariates are included, daycare availability raises the probability of participation by 1.5 percentage points when the child is two, rising to 5.3–5.7 percentage points for years three through six — translating to roughly 9 percent more likely to participate relative to the mean. Full-time employment rises by 9–12 percent relative to the mean for years three through six; hours worked increase by 0.27 hours per week (1.8 percent) when the child is four.

The long-run effects persist throughout the entire working life. Relative to the sample mean, mothers with daycare access are 9.7 percent more likely to participate when the first child turns four, declining to 5.7 percent at child age 14, 3.1 percent at child age 22, and still 1.2 percent at child age 34 (when the average mother is approximately 57.7 years old). Full-time employment effects follow a parallel trajectory: 11 percent higher at child age four, 8.2 percent at child age 14, and 4.4 percent at child age 34. Log earnings (conditional on employment) range between 3 and 6 percent higher throughout the observation window; mothers earn 5.3 percent more when the child is 16 and 4.2 percent more when the child is 34.

Heterogeneity by education is a central finding. For low-educated mothers (no post-secondary education, 50 percent of the sample), participation effects are 10.1 percent at child age 10, 5.1 percent at child age 17, and remain statistically significant through 32 years. For higher-educated mothers, participation effects are 3.9 percent at child age 10, fall below 1 percent by child age 17, and become statistically indistinguishable from zero by child age 23. Employment effects are thus larger and more persistent for low-educated mothers. Earnings effects, however, are more closely aligned across education groups and show a distinctive pattern for higher-educated mothers: earnings effects persist and remain significant long after employment effects have faded, suggesting that sustained attachment during child-rearing years translates into qualitative career advancement (not just more years worked) for the more educated group.

Potential mediators include reduced secondary fertility and increased parental separation. Daycare for children aged three to six reduces the total number of children by 0.036 (1.6 percent relative to the mean of 2.2), reduces the probability of having more than two children by 1.8 percentage points (6.0 percent), and increases birth spacing by 0.137 years, making mothers 2.2 percentage points less likely to have a second child within two years. Additionally, mothers with daycare access are 2 percentage points more likely to live apart from the first-born child’s father when that child turns 16 — consistent with greater female economic independence. These mediator effects do not vary systematically by education level. Daycare access does not affect additional educational attainment after first birth, ruling out re-skilling as a channel.

The policy implication is that subsidized universal daycare is not merely a short-run labor supply intervention but a persistent investment in female human capital accumulation, with effects that compound over careers and remain economically meaningful into near-retirement ages.

Layer 2: Deep Dive

What is the identification strategy and what are the key threats to it?

The paper uses a staggered difference-in-differences design. The key variation is the timing of daycare center openings across neighborhoods within municipalities following the 1964/1966 Danish reform. Daycare availability in the year the first-born child turns four is the fixed treatment indicator for long-run regressions; current-year daycare availability is used for contemporaneous regressions. Municipality fixed effects absorb time-invariant local differences; year-of-first-birth dummies absorb aggregate time trends. The main threat is non-random placement of daycare centers — if centers opened in areas where female labor force participation was already rising, the estimates would be upward biased. The paper addresses this with (1) an event study at the neighborhood level using data from 1960 through 2003 showing no pre-reform differential trends between neighborhoods that later received daycare and those that did not (compared against placebo neighborhoods assigned fictitious opening dates mimicking the actual distribution), and (2) a selective migration check showing that mothers who moved longer distances from their birthplace were no more likely to reside in a neighborhood with daycare once the full conditioning set is included. A residual concern is that for mothers having their first child before 1970, neighborhood assignment is measured post-birth (1970 census), which is addressed by a robustness check excluding the pre-1970 first-birth cohort.

How does the paper deal with heterogeneous treatment effects and two-way fixed effects bias?

The paper acknowledges the recent literature on TWFE bias under treatment effect heterogeneity (De Chaisemartin and d’Haultfoeuille 2020; Callaway and Sant’Anna 2021; Sun and Abraham 2021; Borusyak et al. 2024). It replicates the pre-reform event study using the Borusyak et al. (2024) imputation estimator, which is robust to heterogeneous treatment effects and allows for covariates, and finds similar results to the standard TWFE event study (Appendix Figure A.2). The main long-run regressions fix the treatment indicator to daycare availability when the child is four, so there is no variation in treatment timing within a regression, limiting but not eliminating TWFE concerns for the long-run estimates.

What is the main mechanism behind the persistent effects?

The paper attributes the persistence to human capital dynamics: labor force participation during the child-rearing years reduces depreciation of previously accumulated human capital (from education and prior work experience) and enables new on-the-job human capital accumulation through the current job. For low-educated mothers, the primary channel appears to be the extensive margin — daycare moves mothers who would otherwise become homemakers into paid employment, and the employment effects persist because once labor market attachment is established, it is durable. For higher-educated mothers, the earnings-employment gap is the key signal: employment effects fade within roughly 23 years (consistent with convergence once children are no longer preschool age and informal care becomes feasible), yet earnings remain elevated for decades, suggesting that the women who maintained employment during child-rearing years accrued qualitatively better positions — more experience, better job-match, more promotions — compared to those who did not.

What are the main mediators and how are they distinguished?

Three mediators are examined. First, secondary fertility: daycare for children aged 3–6 reduces number of children by 0.036, probability of a third child by 1.8 percentage points, and probability of a fourth child by 0.5 percentage points. The effect operates through daycare for children 3–6 (not 0–2), consistent with the main employment effects operating when the child is three or older. The fertility reduction increases the opportunity cost interpretation — daycare raises the effective wage, making additional children more costly in terms of foregone earnings. Second, birth spacing: mothers with daycare access wait 0.137 more years between first and second child, and are 2.2 percentage points less likely to have the second child within two years, allowing longer uninterrupted work spells. Third, parental separation: mothers with daycare access are 2 percentage points more likely to live apart from the child’s father at child age 16, consistent with greater economic independence from labor market participation reducing barriers to separation. Additional educational attainment after first birth is tested and found to be an insignificant channel (no significant effect overall, a marginal effect only for low-educated mothers), ruling out re-skilling as a mediator.

What heterogeneity is documented beyond the education split?

The paper’s primary heterogeneity analysis is by maternal education level (low: no post-secondary education versus higher: any post-secondary education including vocational training, college, or university). The education split produces the most substantive finding: employment effects are larger and more persistent for low-educated mothers, while the earnings-employment divergence is the distinctive feature for higher-educated mothers. No other dimensions of heterogeneity (by birth cohort, by municipality type beyond the urban indicator, by parity) are formally reported in the main results, though geographic robustness checks (exclusion of three largest cities, exclusion of suburbs) implicitly test whether effects are concentrated in particular settings and find they are not.

What robustness checks are run?

Four main sets of robustness checks are reported. First, selective migration: regressions of daycare availability on distance moved from birthplace (linear, quadratic, and IHST-transformed) with the full conditioning set show no significant relationship, ruling out systematic sorting into daycare neighborhoods. Second, pre-1970 cohort exclusion: restricting to mothers with first birth after 1970 (for whom the 1970 census address is predetermined relative to birth) yields qualitatively similar results, though participation effect sizes are somewhat smaller. Third, urban geography: excluding the three largest municipalities (Copenhagen, Frederiksberg, Aarhus, Odense) and separately excluding suburbs of Copenhagen and Aarhus both leave the main results intact. Fourth, differential time trends: allowing the most populous neighborhood within each municipality to have its own set of time dummies (to capture potentially faster urban trend evolution) does not change the finding that participation and earnings effects persist beyond 30 years. The paper also shows that results are robust to an alternative participation definition based solely on ATP contributions for all years (versus mixing ATP pre-1980 and earnings post-1980).

How does this paper relate to prior work and what is its main contribution?

The prior literature falls into two camps. The short-run camp (Havnes and Mogstad 2011 for Norway; Carta and Rizzica 2018 for Italy; Bettendorf et al. 2015 for Netherlands; Cascio 2009 and Fitzpatrick 2012 for the US) documents modest to moderate employment effects during the preschool years. The medium-run camp (Lefebvre et al. 2009 and Haeck et al. 2015 for Quebec; Nollenberger and Rodriguez-Planas 2015 for Spain; Herbst 2017 for the US Lanham Act) tracks effects up to about 11–17 years. This paper’s first contribution is extending the window to 34 years — covering the majority of the working life — using Danish administrative data that allow continuous observation rather than decennial census snapshots. The second contribution is documenting the earnings-employment divergence for higher-educated mothers specifically, which was not visible in shorter windows. The third contribution is the simultaneous analysis of fertility, spacing, and parental separation as mediators using the same administrative data and identification strategy, rather than treating these as separate exercises in different papers.

What are the scope conditions and policy implications?

Several scope conditions qualify the policy implications. First, the context is a universal reform in a Nordic welfare state with strong labor market institutions and universal access; the results may not directly generalize to settings with low baseline female employment or weak formal sector employment. Second, the relevant margin for the 1960s–70s cohorts was daycare for children aged three to six; the paper notes that by recent decades the relevant margin has shifted to children under two (consistent with Simonsen 2010 finding effects for younger children in 2001 data), possibly reflecting changing cultural norms or the fact that 1960s–70s mothers had multiple children before returning to work. Third, the employment effects are larger for low-educated mothers, so the labor market attachment argument applies most forcefully to this group. Fourth, the negative fertility effects mean that the total welfare calculation must weigh labor market gains against reductions in desired family size. The policy implication the paper emphasizes is that universal daycare is an investment in long-run economic output, not merely a short-run participation subsidy, because the labor market attachment it induces during child-rearing years compounds over careers through human capital accumulation.

What is the sample and data structure?

The sample consists of 370,602 mothers who had their first child between 1964 and 1975 and were resident in Denmark in 1970 (from the census), after excluding women with immigrant backgrounds (2.2 percent) and those who died or emigrated before the first child turned 16 (0.6 percent). Employment is observed from the birth of the first child through 34 years after (1964–2009 approximately); earnings from 1980 through 2015. The daycare panel is constructed from historical yearbooks (1964–1975) and administrative registers (1976–1993) and provides yearly neighborhood-level data on daycare availability. The average mother in the sample was born in 1945, was 23.7 years old at first birth, had 10.8 years of education, and had 2.2 children total. The sample is split roughly 50/50 between low-educated and higher-educated mothers.

Why do effects appear only when the child is three, not earlier?

The paper finds that contemporary participation effects are small and statistically insignificant for years zero through two, then jump sharply at year three. The paper attributes this to two factors: (1) the universal daycare reform primarily expanded slots for children aged three to six, with nurseries for children under three expanding much more slowly through the 1980s and 1990s (Figure A.1 in the paper); and (2) cultural norms and the multi-child fertility pattern of this cohort — mothers in the 1960s–70s were more likely to have multiple children before returning to work, implying that the eldest child often reached age three or four before the mother re-entered employment. This contrasts with more recent periods (Simonsen 2010 uses 2001 data) where the relevant margin has shifted to children under two.

Key Concepts

Universal daycare: In the paper’s sense, daycare centers open to children from all socioeconomic backgrounds (not means-tested), with building costs fully publicly funded and operating costs split among state, municipality, and parents (with parents paying 30 percent), following the 1964 Danish reform. Contrasted with the pre-reform ’targeted’ system that only subsidized institutions where two-thirds of children came from low-income families.

Working lifetime effects: The paper’s central object of analysis: the causal impact of early daycare access on maternal labor outcomes measured annually across 34 years after the birth of the first child, covering the majority of the working life. Distinguished from short-run (0–7 year) and medium-run (up to 11–17 year) effects documented in prior work.

Labor market attachment: As used in the paper, the sustained connection to paid employment during the child-rearing years (when children are of preschool age). The paper argues that attachment during this period is the mechanism for long-run effects because it reduces human capital depreciation and enables on-the-job accumulation of experience and job-specific skills.

ATP (Supplementary Pension Fund) contributions: The paper’s primary employment measure for years before 1980. Annual ATP contributions are proportional to hours worked: one-third contribution corresponds to 10–19 hours/week, two-thirds to 20–29 hours/week, and full contribution to 30 or more hours/week. Used to construct both a participation dummy and a full-time employment dummy (full ATP contribution = at least 30 hours/week). Crucially, the unemployed, self-employed, and those outside the labor force made no ATP contributions during this period.

Human capital depreciation channel: The mechanism by which absence from the labor market during child-rearing years erodes previously accumulated skills (from education and prior work). The paper uses this concept, following Adda et al. (2017) and Lefebvre et al. (2009), to explain why participation effects on earnings can persist long after direct employment effects have diminished: mothers who worked during preschool years entered subsequent career phases with a larger, less-depreciated human capital stock.

Secondary fertility decisions: The paper’s term for fertility choices conditional on already having a first child, i.e., the decision to have additional children. Examined on the intensive margin (number of additional children, spacing between births) rather than extensive margin (whether to have any children), because the sample consists entirely of women who already have at least one child.

Daycare for 3–6 year olds vs. 0–2 year olds: The paper distinguishes between two types of daycare that expanded at different speeds: daycare for children aged 3–6 expanded rapidly from 1966, while nurseries for children under 3 (crèches) expanded only from the 1980s–1990s. All significant effects in the paper — on employment, fertility, and parental separation — load onto access to daycare for children aged 3–6, not 0–2, consistent with the historical timing of the expansion.