WAGES, TAXES AND PUBLICLY PROVIDED DAY-CARE

Public employment growth has been parallelled by increased female labo ur force participation, while real wages for typical female public sec tor occupations have not increased, In a theoretical model we, first, show that there is a tradeoff between day care provision and gross wag es for occupations for which day care is a complement. It is possible to combine increased public labour demand with public day care provisi on leaving the wage unaffected. Second, non-parents will be in favour of increasing day care as long as day care productivity is higher than the inverse of the tax rate. This is because the effective labour sup ply and, therefore, the tax base increase. Third, parents want to push day care provision even further, They are prepared to accept a lower day care productivity than non-parents because day care provision rela xes the constraint on their desired labour supply. The Pareto efficien t day care provision is between parents' and non-parents' preferred le vels.