Most industrialized countries have very low birth rates, jeopardizing the health of their retirement systems. Many governments try policies to increase fertility. However, in the name of gender equality and of improving female labor force participation, it is difficult to increase fertility while keeping females working.
The most extreme case is Sweden. Female labor force participation is at an international high, and fertility is very low, despite near universal use of subsidizing day cares. How could it be possible to increase fertility without discouraging work? Eva Mörk, Anna Sjögren and Helena Svaleryd show that increasing the day care subsidy works wonders. A lifetime equivalent of US$17,800 in subsidy led to a 4-6% increase in the birth rate. Not bad for a country that was thought to already have maximized all benefits.