When Childcare Disappears: Household Labor Supply, Gender Inequality, and Informal Work

Public childcare can relax household time constraints and strengthen women’s labor market attachment, yet little is known about the consequences of withdrawing such support. This paper examines the labor supply effects of the abrupt 2019 termination of Mexico’s Programa de Estancias Infantiles (PEI), a large-scale childcare subsidy targeting low-income, predominantly informal-sector working mothers. Using a panel of Mexican municipalities from 2017–2019 and exploiting cross-municipal variation in pre-termination PEI exposure, we implement a dose–response difference-in-differences design. Municipalities with higher pre-termination coverage experienced a decline of approximately one hour per week in household labor supply, about 2 percent relative to the pre-reform mean, driven primarily by reduced employment participation rather than hours conditional on work. While average effects are modest, substantial heterogeneity emerges. Labor supply contractions are concentrated among households with children aged 0–2 years, for whom no universal public substitute exists. Effects are markedly larger among female sole providers and informal workers: weekly hours decline by roughly 4 to 5.5 hours among sole-provider women in the informal sector and street vending, and by nearly 7 hours among paid domestic workers with young children. These magnitudes are several times larger than the average treatment effect, revealing how childcare loss interacts with caregiving intensity and occupational precarity to generate disproportionately large labor supply contractions among the most vulnerable women. By analyzing a nationwide policy rollback rather than program expansion, the paper provides new causal evidence on how institutional retrenchment in care provision disproportionately constrains labor supply among vulnerable women and households.