Parental involvement and children's human capital: a tax-subsidy experiment

Parental time with children has a significant influence on early childhood development, future accumulation of a wide array of cognitive and non-cognitive skills and the ultimate success of the child. The model presented in this article features endogenous fertility and labour supply while distinguishing between various types of parental time spent with children. We conduct a quantitative analysis to investigate the importance of the role of family for children's skill formation. In the model, parents are subsidized for spending publicly verifiable productive time with their children. Such intervention can significantly enhance the human capital of children, yet it affects the overall labour supply of the primary caretaker in an ambiguous way.