Child Care Policy and Capital Mobility

Earlier reports have described effects of child care policy on fertility and education investment in an endogenous fertility model. Nevertheless, these studies examine closed economies in which capital accumulation is achieved by saving or small open economies in which capital accumulation is not considered. We can regard a capital mobility model as another model for which capital accumulation in one country affects capital accumulation in another country. Our paper presents consideration of capital mobility and examines how child care policy in one country affects another country. Results show that child allowances and education subsidies positively or negatively affect human capital accumulation in the foreign country even if fertility and human capital accumulation can be raised in the country in which child care policies are provided.