Evaluating the Impact of the 2021 CDCTC Expansion on Women’s Labor Supply and Childcare Utilization

Grant description:

The COVID-19 recession was unique in that it was marked by a labor shortage in many U.S. sectors, leading policymakers to experiment with new tools to mitigate these losses. This project will study the impact of the child care spending provisions of the American Rescue Plan Act of 2021 on women’s labor supply and child care utilization. The American Rescue Plan included $24 billion in child care stabilization grants, which were direct block grants to states to support child care services. The law also included the largest-ever expansion of the Child and Dependent Care Tax Credit, which increased by 400 percent the child-care-related transfers paid to some U.S. households in 2022, relative to past years. Unlike other child-related transfers, only children ages 13 and under are eligible for the Child and Dependent Care Tax Credit . Utilizing unique tax record data from the universe of all U.S. tax filers—which includes care providers, as well as CDCTC claims—the authors will use a regression discontinuity design in children’s age to estimate the causal impact of this credit on household choices and how the impact varies with socioeconomic factors.