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How Responsive is Female Labour Supply to Child Care Costs: New Australian Estimates

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Author Info

  • Gong, Xiaodong

    ()
    (NATSEM, University of Canberra)

  • Breunig, Robert

    ()
    (Australian National University)

  • King, Anthony

    ()
    (Australian Treasury)

Abstract

The degree of responsiveness of Australian women's labour supply to child care cost has been a matter of some debate. There is a view that the level of responsiveness is very low or negligible, running counter to international and anecdotal evidence. In this paper we review the Australian and international literature on labour supply and child care, and provide improved Australian estimates of labour supply elasticities and child care demand elasticities with respect to gross child care price. We find that the limited literature in Australia has suffered from measurement error problems stemming in large part from shortcomings with data on child care price and child care usage. We use detailed child care data from three recent waves of the Household, Income and Labour Dynamics in Australia (HILDA) Survey (covering the period 2005 to 2007) to address these problems. We extend the standard labour supply and child care model to allow for separate effects of different child care prices for children in different age ranges and we calculate regional child care prices based upon child-level information. The salient finding is that child care prices do have statistically significant effects on mothers’ labour supply and child care demand. The new estimates are in line with international findings, and their robustness is supported by a validation exercise involving an alternative technique and an earlier time period.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5119.

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Length: 59 pages
Date of creation: Aug 2010
Date of revision:
Publication status: published as 'Partnered Women's Labour Supply and Child Care Costs in Australia: Measurement Error and the Child-Care Price' in: Economic Record, 2012, 88, 51-69
Handle: RePEc:iza:izadps:dp5119

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Keywords: labour supply; child care demand; child care price; elasticity;

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References

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  1. 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. Ellis Connolly & Kathryn Davis & Gareth Spence, 2011. "Trends in Labour Supply," RBA Bulletin, Reserve Bank of Australia, pages 1-8, June.
  2. Xiaodong Gong & Robert Breuing & Anthony King, 2011. "Partnered women’s labour supply and child care costs in Australia: measurement error and the child care price," CEPR Discussion Papers 652, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  3. Rebecca Brown & Tue Gørgens, 2009. "Corporate governance and financial performance in an Australian context," Treasury Working Papers 2009-02, Treasury, Australian Government, revised Mar 2009.
  4. Xiaodong Gong & Robert Breunig, 2010. "Child care availability, quality and affordability: are local problems related to maternal labour supply ?," Treasury Working Papers 2010-02, Treasury, Australian Government, revised Apr 2010.
  5. Xiaodong Gong & Robert Breuing, 2011. "Estimating Net Child Care Price Elasticities of Partnered Women With Pre-School Children Using a Discrete Structural Labour Supply-Child Care Model," CEPR Discussion Papers 653, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  6. Katrin Elborgh-Woytek & Monique Newiak & Kalpana Kochhar & Stefania Fabrizio & Kangni Kpodar & Philippe Wingender & Benedict J. Clements & Gerd Schwartz, 2013. "Women, Work, and the Economy:Macroeconomic Gains from Gender Equity," IMF Staff Discussion Notes 13/10, International Monetary Fund.

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