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Partnered women’s labour supply and child care costs in Australia: measurement error and the child care price

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  • Xiaodong Gong
  • Robert Breuing
  • Anthony King

Abstract

We show that measurement error in the constructed price of child care can explain why previous Australian studies have found partnered women’s labour supply to be unresponsive to child care prices. Through improved data and improved construction of the child care price variable, we find child care price elasticities that are statistically significant, negative and in line with elasticities found in other developed countries.

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Bibliographic Info

Paper provided by Centre for Economic Policy Research, Research School of Economics, Australian National University in its series CEPR Discussion Papers with number 652.

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Date of creation: Nov 2011
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Handle: RePEc:auu:dpaper:652

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Keywords: Labour supply; child care; local area effects;

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References

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  1. Robert Breunig & Deborah A. Cobb-Clark & Xiaodong Gong, 2008. "Improving the Modelling of Couples' Labour Supply," The Economic Record, The Economic Society of Australia, vol. 84(267), pages 466-485, December.
  2. Blau, David M & Robins, Philip K, 1988. "Child-Care Costs and Family Labor Supply," The Review of Economics and Statistics, MIT Press, vol. 70(3), pages 374-81, August.
  3. Denise Doiron & Guyonne Kalb, 2004. "Demands for Childcare and Household Labour Supply in Australia," Melbourne Institute Working Paper Series wp2004n06, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  4. Anu Rammohan & Stephen Whelan, 2007. "The Impact Of Childcare Costs On The Full-Time/Part-Time Employment Decisions Of Australian Mothers," Australian Economic Papers, Wiley Blackwell, vol. 46(2), pages 152-169, 06.
  5. Gong, Xiaodong & Breunig, Robert & King, Anthony, 2010. "How Responsive is Female Labour Supply to Child Care Costs: New Australian Estimates," IZA Discussion Papers 5119, Institute for the Study of Labor (IZA).
  6. Connelly, Rachel, 1992. "The Effect of Child Care Costs on Married Women's Labor Force Participation," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 83-90, February.
  7. Lisa M. Powell, 2002. "Joint Labor Supply and Childcare Choice Decisions of Married Mothers," Journal of Human Resources, University of Wisconsin Press, vol. 37(1), pages 106-128.
  8. Blau, David & Currie, Janet, 2006. "Pre-School, Day Care, and After-School Care: Who's Minding the Kids?," Handbook of the Economics of Education, Elsevier.
  9. Susan L. Averett & H. Elizabeth Peters & Donald M. Waldman, 1997. "Tax Credits, Labor Supply, And Child Care," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 125-135, February.
  10. Katharina Wrohlich, 2006. "Labor Supply and Child Care Choices in a Rationed Child Care Market," Discussion Papers of DIW Berlin 570, DIW Berlin, German Institute for Economic Research.
  11. Andren, Thomas, 2003. "The choice of paid childcare, welfare, and labor supply of single mothers," Labour Economics, Elsevier, vol. 10(2), pages 133-147, April.
  12. Rammohan, Anu, 2004. "Child care and female employment decisions: A theoretical note," Working Papers 3, University of Sydney, School of Economics.
  13. Ribar, D.C., 1991. "A Structural Model of Child Care and the Labor Supply of Married Women," Papers 1-91-1, Pennsylvania State - Department of Economics.
  14. Ribar, D.C., 1990. "Child Care And The Labor Supply Of Married Women: Reducted Form Evidence," Papers 9-90-9, Pennsylvania State - Department of Economics.
  15. Jean Kimmel, 1998. "Child Care Costs As A Barrier To Employment For Single And Married Mothers," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 287-299, May.
  16. David M. Blau & Alison P. Hagy, 1998. "The Demand for Quality in Child Care," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 104-146, February.
  17. Robert Breunig & Andrew Weiss & Chikako Yamauchi & Xiaodong Gong & Joseph Mercante, 2011. "Child Care Availability, Quality and Affordability: Are Local Problems Related to Labour Supply?," The Economic Record, The Economic Society of Australia, vol. 87(276), pages 109-124, March.
  18. Guyonne Kalb & Wang-Sheng Lee, 2007. "Childcare Use and Parents’ Labour Supply in Australia," Melbourne Institute Working Paper Series wp2007n13, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  19. Tom Kornstad & Thor Thoresen, 2007. "A discrete choice model for labor supply and childcare," Journal of Population Economics, Springer, vol. 20(4), pages 781-803, October.
  20. Stephen Whelan & Anu Rammohan, 2005. "Child Care and Female Decisions," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(2), pages 203-225, June.
  21. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non-Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, 03.
  22. Naci Mocan, 2007. "Can consumers detect lemons? An empirical analysis of information asymmetry in the market for child care," Journal of Population Economics, Springer, vol. 20(4), pages 743-780, October.
  23. Richard Blundell & Alan Duncan & Julian McCrae & Costas Meghir, 2000. "The labour market impact of the working families’ tax credit," Fiscal Studies, Institute for Fiscal Studies, vol. 21(1), pages 75-103, March.
  24. Heckman, James J, 1974. "Shadow Prices, Market Wages, and Labor Supply," Econometrica, Econometric Society, vol. 42(4), pages 679-94, July.
  25. Charles Michalopoulos & Philip K. Robins & Irwin Garfinkel, 1992. "A Structural Model of Labor Supply and Child Care Demand," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 166-203.
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Cited by:
  1. Apps, Patricia & Kabátek, Jan & Rees, Ray & van Soest, Arthur, 2012. "Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children," IZA Discussion Papers 7007, Institute for the Study of Labor (IZA).
  2. Gong, Xiaodong & Breunig, Robert, 2012. "Child Care Assistance: Are Subsidies or Tax Credits Better?," IZA Discussion Papers 6606, Institute for the Study of Labor (IZA).

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