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Child care and female employment decisions: A theoretical note

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  • Rammohan, Anu

Abstract

The empirical literature is divided over the issue of whether child care costs are a significant barrier to female employment. In this paper we develop a theoretical model that contributes to the literature (1) by allocating mother's time between work, leisure and child care and (2) by introducing the possibility of uncertainty in second period income because of a greater probability of divorce. We examine how these changes affect decisions on labour supply and purchase of child care. We show that although an increase in the price of child care reduces the demand for child care, it has an ambiguous impact on female employment decisions. From a policy point of view, this implies that government subsidies aimed at mitigating the cost of child care, may not have their desired impact in encouraging greater female labour force participation. However, an increase in the probability of child care unambiguously increases female labour supply and purchase of child care.

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File URL: http://hdl.handle.net/2123/7641
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Bibliographic Info

Paper provided by University of Sydney, School of Economics in its series Working Papers with number 3.

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Date of creation: Jul 2004
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Handle: RePEc:syd:wpaper:2123/7641

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Postal: Sydney, NSW 2006
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Web page: http://sydney.edu.au/arts/economics
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Related research

Keywords: childcare; female labour supply;

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Cited by:
  1. Guyonne Kalb & Wang-Sheng Lee, 2008. "Childcare Use And Parents' Labour Supply In Australia ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 272-295, 09.
  2. Robert Breunig & Xiaodong Gong & Anthony King, 2012. "Partnered Women's Labour Supply and Child‐Care Costs in Australia: Measurement Error and the Child‐Care Price," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 51-69, 06.
  3. Yin King Fok & Sung-Hee Jeon & Roger Wilkins, 2009. "Does Part-Time Employment Help or Hinder Lone Mothers Movements into Full-Time Employment?," Melbourne Institute Working Paper Series wp2009n25, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  4. Chikako Yamauchi, 2009. "The Availability of Child Care Centers, Perceived Search Costs and Parental Life Satisfaction," CEPR Discussion Papers 620, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  5. Xiaodong Gong & Robert Breunig & Anthony King, 2010. "New estimates of the relationship between female labour supply and the cost, availability, and quality of child care," Economic Roundup, Treasury, Australian Government, issue 1, pages 51-62, April.

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