The incentive effects of the Ontario Child Care Supplement for working families on household labour supply decisions

This paper examines the efficacy of the Ontario Child Care Supplement for working families on the labour supply decisions of single parents with children. The empirical methodology consists of a difference-in-differences estimation strategy using Canadian Census data for 1996 and 2001. Findings show that the supplement provides labour market incentives for households on the intensive margin. That is, for households at work, findings show that substitution effects dominate income effects on weeks worked. An additional $1,000 in benefits results in an increase of approximately two to three working weeks.