That is the conclusion of work that aims to understand in granular detail how different government interventions affect people’s behavior. It amounts to a liberal version of “supply-side economics,” an approach to economics often associated with the conservatives of the Reagan era.
The clearest example of a program that appears to increase labor supply and hence the United States’ economic potential is the earned-income tax credit (E.I.T.C.), first enacted in 1975 and expanded several times since then. It supplements the income of low-income workers, and numerous studies find that its existence means more Americans work than would in its absence.
Child care subsidies appear to work the same way. It’s a pretty straightforward equation that when government intervention makes child care services cheaper than they would otherwise be, people who might otherwise stay home raising their children instead work. More women work in countries that subsidize child care and offer generous parental leave than in those that don’t.
Chosen excerpts by Job Market Monitor. Read the whole story at Supply-Side Economics, but for Liberals – The New York Times