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Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children

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  • Patricia Apps
  • Jan Kabátek
  • Ray Rees
  • Arthur van Soest

Abstract

This paper introduces a static structural model of hours of market labor supply, time spent on child care and other domestic work, and bought in child care for married or cohabiting mothers with pre-school age children. The father's behavior is taken as given. The main goal is to analyze the sensitivity of hours of market work, parental child care, other household production and formal child care to the wage rate, the price of child care, taxes, benefits and child care subsidies. To account for the non-convex nature of the budget sets and, possibly, the household technology, a discrete choice model is used. The model is estimated using the HILDA dataset, a rich household survey of the Australian population, which contains detailed information on time use, child care demands and the corresponding prices. Simulations based on the estimates show that the time allocations of women with pre-school children are highly sensitive to changes in wages and the costs of child care. A policy simulation suggests that labor force participation and hours of market work would increase substantially in a fiscal system based solely on individual rather than joint taxation.

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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 677.

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Date of creation: Dec 2012
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Handle: RePEc:auu:dpaper:677

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Keywords: Time use; income tax; child care subsidies;

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References

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  1. Soest, A.H.O. van & Das, J.W.M. & Gong, X., 2001. "A Structural Labour Supply Model with Flexible Preferences," Open Access publications from Tilburg University urn:nbn:nl:ui:12-119390, Tilburg University.
  2. 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.
  3. Alberto Alesina & Andrea Ichino & Loukas Karabarbounis, 2011. "Gender-Based Taxation and the Division of Family Chores," American Economic Journal: Economic Policy, American Economic Association, vol. 3(2), pages 1-40, May.
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  9. Xiaodong Gong & Robert Breunig & Anthony King, 2011. "Partnered women's labour supply and child care costs in Australia: Measurement error and the child care price," NATSEM Working Paper Series 11/13, University of Canberra, National Centre for Social and Economic Modelling.
  10. Arthur Van Soest & Elena Stancanelli, 2010. "Does income taxation affect partners’ household chores?," Documents de Travail de l'OFCE 2010-12, Observatoire Francais des Conjonctures Economiques (OFCE).
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  15. Richard Blundell & Amanda Gosling & Hidehiko Ichimura & Costas Meghir, 2006. "Changes in the Distribution of Male and Female Wages Accounting for Employment Composition Using Bounds," CIRJE F-Series CIRJE-F-420, CIRJE, Faculty of Economics, University of Tokyo.
  16. Xiaodong Gong & Robert Breunig, 2012. "Estimating net chid care price elasticities of partnered women with pre-school children using a discrete structural labour supply-child care model," Treasury Working Papers 2012-01, Treasury, Australian Government, revised Nov 2012.
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  22. 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.
  23. Apps,Patricia & Rees,Ray, 2009. "Public Economics and the Household," Cambridge Books, Cambridge University Press, number 9780521716284, October.
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Cited by:
  1. Colella, Fabrizio, 2014. "Women's Part-Time - Full-Time Wage Differentials in Europe: an Endogenous Switching Model," MPRA Paper 55287, University Library of Munich, Germany.
  2. Lars Kunze & Nicolai Suppa, 2013. "Job Characteristics and Labour Supply," Ruhr Economic Papers 0418, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  3. Eliane El Badaoui & Eleonora Matteazzi, 2014. "To be a Mother, or not to be? Career and Wage Ladder in Italy and the UK," EconomiX Working Papers 2014-30, University of Paris West - Nanterre la Défense, EconomiX.
  4. Johannes Geyer & Peter Haan & Katharina Wrohlich, 2014. "The Effects of Family Policy on Mothers' Labor Supply: Combining Evidence from a Structural Model and a Natural Experiment," Discussion Papers of DIW Berlin 1366, DIW Berlin, German Institute for Economic Research.
  5. Eleonora Matteazzi & Ariane Pailhé & Anne Solaz, 2013. "Does Part-Time Employment Widen the Gender Wage Gap? Evidence from Twelve European Countries," Working Papers 293, ECINEQ, Society for the Study of Economic Inequality.
  6. Kabatek, J., 2013. "Iteration Capping For Discrete Choice Models Using the EM Algorithm," Discussion Paper 2013-019, Tilburg University, Center for Economic Research.

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