accessible childcare or parental leave provisions can be considered to target an increase in female labor rate participation and career progression. If costs to employers are subsidized, it can also reduce the perception that women are costlier to employ.

Incentive schemes can encourage firms to offer childcare or parental leave to employees through tax incentives or direct subsidies to firms that provide these provisions. For example, in the United States, a childcare tax credit is available to employers who pay a childcare facility to provide childcare services to employees, or help refer employees to a qualified childcare facility. The program provides a federal tax credit of 25 percent per firm, or up to USD 150,000 a year.<sup>72</sup> In OECD countries, paid parental leave was found to be beneficial in increasing female employment rates.<sup>73</sup>

# **Design considerations**

To be effective, incentive schemes involving childcare and parental leave should consider:

- **Focusing on contexts where the cost of private childcare is a significant constraint** . If affordable childcare (formal or informal) is already widely available, then adding below‐market rate childcare through employers can crowd out existing options without affecting labor force participation.

- **Targeting and structuring incentives for childcare and parental leave to reach women who face the greatest barriers to participating in the labor market** (e.g. low‐income mothers), and to the firms or sectors that employ them. In many developing countries, most women (and men) work in the informal sector and cannot take advantage of parental leave. In those cases, parental leave policies might be less effective. How incentives are structured also matter for their distributional consequences. A study in Australia found that using childcare subsidies, as opposed to childcare tax incentives, redistributed benefits towards lower‐earning and less‐educated households.<sup>74</sup>

- **Evaluating whether family‐friendly policies like childcare and parental leave should be targeted equally at both parents** . Family‐friendly policies are often made available primarily to women, with positive intentions, but subpar outcomes. If firms are incentivized to provide childcare only for women, then the perceived cost of hiring women will still be higher than that of hiring men. It may temporarily lower the cost of hiring women, but will not alter the underlying reluctance of firms to employ women. In addition, offering incentives to women only reinforces gender norms that women should be the primary caretakers of children. At the same time, providing equal incentives for both parents can also result in unintended consequences if men benefit disproportionally from the same provisions. For example, the adoption of gender‐neutral parental leave policies in research‐intensive universities in the United States was found to substantially reduce female tenure rates while substantially increasing male tenure rates.<sup>75</sup> The results suggest the impact of gender‐neutral leave policy will depend closely on the sectors and nature of work

> 72 “Credit for Employer‐Provided Childcare Facilities and Services,” IRS, December 2013, https://www.irs.gov/pub/irs‐ access/f8882_accessible.pdf.

> 73 Florence Jaumotte, “Female Labour Force Participation: Past Trends and Main Determinants in OECD Countries” (OECD, December 12, 2003),

> http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?doclanguage=en&cote=eco/wkp(2003)30.

> 74 Xiaodong Gong and Robert Breunig, “Child Care Assistance: Are Subsidies or Tax Credits Better?,” Discussion Paper Series (IZA, May 2012).

> 75 Antecol, Bedard and Stearns, “Equal but Inequitable: Who Benefits from Gender‐Neutral Tenure Clock Stopping Policies?” Discussion Paper Series (IZA, April 2016).

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