Labor supply heterogeneity and demand for child care of mothers with young children

Patricia Apps, Jan Kabatek*, Ray Rees, Arthur van Soest

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

5 Citations (Scopus)

Abstract

This paper presents a structural model of the labor supply and child care choices of partnered mothers with pre-school aged children. The father's time-use decisions are taken as given. The main goal is to analyze the sensitivity of maternal time use to the price of child care, taxes, benefits and child care subsidies. To account for non-convexities in the budget sets, we specify a discrete choice model. We estimate the model on data on couples with young children from the HILDA survey representative of the Australian population, which contains detailed information on time use and bought-in child care. Simulations based on the estimated parameters show that the time decisions of mothers with pre-school children are highly sensitive to changes in wages and the cost of child care. Our results also suggest that lowering effective tax rates faced by partnered mothers as second earners, by switching from family payments that are targeted on joint incomes to payments that are universal and funded by a more progressive individual-based income tax, would lead to a substantial increase in their labor force participation and hours of work.

Original languageEnglish
Pages (from-to)1641-1677
Number of pages37
JournalEmpirical Economics: A quarterly journal of the Institute for Advanced Studies
Volume51
Issue number4
DOIs
Publication statusPublished - Dec 2016

Keywords

  • Time use
  • Income tax
  • Child care subsidies

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