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A Structural Model of Childcare, Welfare, and the Labor Supply of Single Mothers

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  • Andrén, Thomas

    ()
    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

Abstract

This paper considers the simultaneous relationship of the single mother’s decision to choose paid childcare, welfare participation and labor supply, and estimates a structural model that allows for a free error covariance. We use a discrete approach to the choice of labor supply together with the discrete choices of utilized paid childcare and welfare participation, which allow formulating the model as a multiple-choice problem. The results show that there is an association between social assistance, paid childcare and labor supply, but that the relationship is non-symmetric. An increase in the social assistance norms has a relatively small effect on paid childcare utilization, but a relatively larger effect on the mean labor supply. In contrast, a corresponding reduction in the childcare cost has a relatively large effect on the social assistance utilization but a relatively small effect on the mean labor supply. Our estimates suggest that a decrease in childcare cost increases the labor supply of those working rather than encourages non-workers to start work, which implies that childcare cost is foremost a barrier to fulltime work rather then a barrier to work at all.

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File URL: http://hdl.handle.net/2077/2848
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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 82.

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Length: 40 pages
Date of creation: 30 Sep 2002
Date of revision:
Publication status: Published in Labour Economics, 2003, pages 133-147.
Handle: RePEc:hhs:gunwpe:0082

Note: Published as "The choice of paid childcare, welfare, and labor supply of single mothers" in Labour Economics
Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Related research

Keywords: labor supply; paid childcare; welfare participation; structural model; simulated maximum likelihood; Halton draws;

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References

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  1. Moffitt, Robert, 1983. "An Economic Model of Welfare Stigma," American Economic Review, American Economic Association, vol. 73(5), pages 1023-35, December.
  2. 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.
  3. 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.
  4. Michael P. Keane & Robert Moffitt, 1995. "A structural model of multiple welfare program participation and labor supply," Working Papers 557, Federal Reserve Bank of Minneapolis.
  5. Keane, Michael P, 1994. "A Computationally Practical Simulation Estimator for Panel Data," Econometrica, Econometric Society, vol. 62(1), pages 95-116, January.
  6. James J. Heckman, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Marriage, Family, Human Capital, and Fertility, pages 136-169 National Bureau of Economic Research, Inc.
  7. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
  8. Rachel Connelly & Jean Kimmel, 2001. "The Effect of Child Care Costs on the Labor Force Participation and Welfare Recipiency of Single Mothers: Implications for Welfare Reform," Upjohn Working Papers and Journal Articles 01-69, W.E. Upjohn Institute for Employment Research.
  9. 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.
  10. James J. Heckrnan, 1974. "Effects of Child-Care Programs on Women's Work Effort," NBER Chapters, in: Economics of the Family: Marriage, Children, and Human Capital, pages 491-524 National Bureau of Economic Research, Inc.
  11. McFadden, Daniel, 1989. "A Method of Simulated Moments for Estimation of Discrete Response Models without Numerical Integration," Econometrica, Econometric Society, vol. 57(5), pages 995-1026, September.
  12. Susan L. Averett & H. Elizabeth Peters & Donald M. Waldman, . "Tax Credits, Labor Supply, and Child Care," University of Chicago - Population Research Center 92-9a, Chicago - Population Research Center.
  13. Siv Gustafsson & Frank Stafford, 1992. "Child Care Subsidies and Labor Supply in Sweden," Journal of Human Resources, University of Wisconsin Press, vol. 27(1), pages 204-230.
  14. Kimmel, Jean, 1995. "The Effectiveness of Child-Care Subsidies in Encouraging the Welfare-to-Work Transition of Low-Income Single Mothers," American Economic Review, American Economic Association, vol. 85(2), pages 271-75, May.
  15. Cogan, John F, 1981. "Fixed Costs and Labor Supply," Econometrica, Econometric Society, vol. 49(4), pages 945-63, June.
  16. 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.
  17. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
  18. 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.
  19. Fraker, Thomas & Moffitt, Robert, 1988. "The effect of food stamps on labor supply : A bivariate selection model," Journal of Public Economics, Elsevier, vol. 35(1), pages 25-56, February.
  20. Danziger, Sheldon & Haveman, Robert & Plotnick, Robert, 1981. "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 19(3), pages 975-1028, September.
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