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Child Care Subsidies, Wages, and Employment of Single Mothers

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  • Tekin, Erdal

    ()
    (Georgia State University)

Abstract

This paper provides a comprehensive analysis of employment and child care payment decisions of single mothers in the early post-welfare reform environment, using data from the National Survey of America’s Families (NSAF). I develop and estimate a model that examines the effects of the price of child care and the wage rate on employment decision as well as the decision to use paid child care among single mothers. The model distinguishes between the full-time and part-time employment decisions as well as the prevailing wages in these two employment markets. A semi-parametric random effects estimator and the Gaussian Quadrature are used together to estimate the system of equations for the discrete outcomes of full-time and part-time employment, and child care payment, and the linear equations of the price of child care, and part-time and full-time wages in a unified framework. The econometric model also controls for the endogeneity of child care subsidy receipt and adjusts the hourly price of child care for the amount of subsidy for mothers who receive one. The results show that full-time working mothers are more sensitive to the price of child care than part-time working mothers. A lower price of child care leads to increases in overall employment and the use of paid child care. However, much of the increase in employment is in the form of full-time employment. An increase in the full-time wage rate leads to increases in overall employment and the use of paid child care. The effects of full-time wage rate are estimated to be much larger than those of the price of child care. Part-time wage effects are found to be so small to have significant implications.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 517.

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Length: 58 pages
Date of creation: Jun 2002
Date of revision:
Publication status: published in: Journal of Human Resources, 42 (2), 2007, 453-487
Handle: RePEc:iza:izadps:dp517

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Keywords: wages; employment; child care; child care subsidies;

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References

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  1. Blank, Rebecca M, 1988. "Simultaneously Modeling the Supply of Weeks and Hours of Work among Female Household Heads," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 177-204, April.
  2. Rebecca M. Blank & David Card & Philip K. Robins, 1999. "Financial Incentives for Increasing Work and Income Among Low- Income Families," HEW 9902002, EconWPA.
  3. Lisa Barrow, 1996. "An Analysis of Women's Labor Force Participation Following First Birth," Working Papers 742, Princeton University, Department of Economics, Industrial Relations Section..
  4. David Blau & Philip Robins, 1991. "Child care demand and labor supply of young mothers over time," Demography, Springer, vol. 28(3), pages 333-351, August.
  5. Berger, Mark C & Black, Dan A, 1992. "Child Care Subsidies, Quality of Care, and the Labor Supply of Low-Income, Single Mothers," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 635-42, November.
  6. 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.
  7. Patricia M. Anderson & Phillip B. Levine, 1999. "Child Care and Mothers' Employment Decisions," JCPR Working Papers 64, Northwestern University/University of Chicago Joint Center for Poverty Research.
  8. David Blau, 2003. "Child Care Subsidy Programs," NBER Chapters, in: Means-Tested Transfer Programs in the United States, pages 443-516 National Bureau of Economic Research, Inc.
  9. repec:fth:prinin:363 is not listed on IDEAS
  10. Averett, S.L. & Peters, H.E. & Waldman, D.M., 1992. "Tax Credits, Labor Supply, and Child Care," University of Chicago - Economics Research Center 92-9, Chicago - Economics Research Center.
  11. 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.
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