This paper sets out to explore the effects of a cash incentive on parents’ choice of
daytime care for children in the age group 1-3 years. By studying the Norwegian
Cash-for-Care reform from 1998/1999 we are able to able to examine this through a
natural experiment. The results show a statistical significant decrease in use of
daycare for the total population, an effect that is stronger for families of low
socioeconomic status. This may work against stated long-term national goals. We are
not able to identify any changes in demand for the immigrant families in the sample
