Estimating net chid care price elasticities of partnered women with pre-school children using a discrete structural labour supply-child care model
AbstractThe purpose of this paper is to improve our understanding of the relationship between child care price and women's labour supply. We specify and estimate a discrete, structural model of the joint household decision over women’s labour supply and child care demand. Parents care about the well-being and development of their children and we capture this by including child care directly in household utility. Our model improves on previous papers in that we allow formal child care to be used for reasons other than freeing up time for mothers to work (such as child development) and we allow mothers’ work hours to exceed formal child care hours. As informal and paternal care are important features of the data, this second relaxation of previous hour constraints is particularly important. We estimate the model using data from 2005 to 2007 from the Household Income and Labour Dynamics in Australia (HILDA) Survey. We find that on average a one percent increase in the net price of child care leads to a decrease in hours of labour provided by partnered women of 0.10 per cent and a decrease in the employment rate of 0.06 per cent. These estimates are statistically significant. Furthermore, we find that labour supply responses are larger for women with lower wages, less education, and lower income.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Treasury, Australian Government in its series Treasury Working Papers with number 2012-01.
Length: 62 pages
Date of creation: Nov 2012
Date of revision: Nov 2012
Child care demand; child care price; women’s labour supply; elasticities; discrete choice model;
Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-22 (All new papers)
- NEP-DCM-2012-12-22 (Discrete Choice Models)
- NEP-DEM-2012-12-22 (Demographic Economics)
- NEP-LAB-2012-12-22 (Labour Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- David C. Ribar, 1992.
"Child Care and the Labor Supply of Married Women: Reduced Form Evidence,"
Journal of Human Resources,
University of Wisconsin Press, vol. 27(1), pages 134-165.
- 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.
- Xiaodong Gong & Arthur van Soest, 2002.
"Family Structure and Female Labor Supply in Mexico City,"
Journal of Human Resources,
University of Wisconsin Press, vol. 37(1), pages 163-191.
- van Soest, Arthur & Gong, Xiaodong, 2000. "Family Structure and Female Labour Supply in Mexico City," IZA Discussion Papers 214, Institute for the Study of Labor (IZA).
- Gong, X. & Soest, A.H.O. van, 1997. "Family Structure and Female Labour Supply in Mexico City," Discussion Paper 1997-114, Tilburg University, Center for Economic Research.
- 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.
- Ribar, David C, 1995.
"A Structural Model of Child Care and the Labor Supply of Married Women,"
Journal of Labor Economics,
University of Chicago Press, vol. 13(3), pages 558-97, July.
- Ribar, D.C., 1993. "A Structural Model of Child Care and the Labor Supply of Married Women," Papers 5-93-1, Pennsylvania State - Department of Economics.
- 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.
- Robert Breunig & Deborah Cobb-Clark & Xiaodong Gong, 2005.
"Improving the Modeling of Couples' Labour Supply,"
CEPR Discussion Papers
499, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Jean Kimmel & Rachel Connelly, 2007. "Mothers’ Time Choices: Caregiving, Leisure, Home Production, and Paid Work," Journal of Human Resources, University of Wisconsin Press, vol. 42(3).
- Andrew Leigh, 2007.
"Returns to Education in Australia,"
CEPR Discussion Papers
561, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Rammohan, Anu, 2004. "Child care and female employment decisions: A theoretical note," Working Papers 3, University of Sydney, School of Economics.
- Tom Kornstad & Thor Thoresen, 2007. "A discrete choice model for labor supply and childcare," Journal of Population Economics, Springer, vol. 20(4), pages 781-803, October.
- Arthur van Soest, 1995. "Structural Models of Family Labor Supply: A Discrete Choice Approach," Journal of Human Resources, University of Wisconsin Press, vol. 30(1), pages 63-88.
- James J. Heckman, 1974.
"Effects of Child-Care Programs on Women's Work Effort,"
in: Marriage, Family, Human Capital, and Fertility, pages 136-169
National Bureau of Economic Research, Inc.
- Heckman, James J, 1974. "Effects of Child-Care Programs on Women's Work Effort," Journal of Political Economy, University of Chicago Press, vol. 82(2), pages S136-S163, Part II, .
- Stephen Whelan & Anu Rammohan, 2005. "Child Care and Female Decisions," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 8(2), pages 203-225, June.
- Charlene M. Kalenkoski & David C. Ribar & Leslie S. Stratton, 2005. "Parental Child Care in Single-Parent, Cohabiting, and Married-Couple Families: Time-Diary Evidence from the United Kingdom," American Economic Review, American Economic Association, vol. 95(2), pages 194-198, May.
- Trevor Breusch & Edith Gray, 2004. "New Estimates of Mothers’ Forgone Earnings Using HILDA Data," Australian Journal of Labour Economics (AJLE), Bankwest Curtin Economics Centre (BCEC), Curtin Business School, vol. 7(2), pages 125-150, June.
- Train,Kenneth E., 2009.
"Discrete Choice Methods with Simulation,"
Cambridge University Press, number 9780521747387, October.
- Denise Doiron & Guyonne Kalb, 2005.
"Demands for Child Care and Household Labour Supply in Australia,"
The Economic Record,
The Economic Society of Australia, vol. 81(254), pages 215-236, 09.
- Denise Doiron & Guyonne Kalb, 2004. "Demands for Childcare and Household Labour Supply in Australia," Melbourne Institute Working Paper Series wp2004n06, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
- 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.
- Bhat, Chandra R., 2001. "Quasi-random maximum simulated likelihood estimation of the mixed multinomial logit model," Transportation Research Part B: Methodological, Elsevier, vol. 35(7), pages 677-693, August.
- Alan Duncan & Gillian Paull & Jayne Taylor, 2001. "Mothers' employment and the use of childcare in the UK," IFS Working Papers W01/23, Institute for Fiscal Studies.
- Patricia Apps & Jan Kabátek & Ray Rees & Arthur van Soest, 2012.
"Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children,"
CEPR Discussion Papers
677, Centre for Economic Policy Research, Research School of Economics, Australian National University.
- Apps, Patricia & Kabátek, Jan & Rees, Ray & van Soest, Arthur, 2012. "Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children," IZA Discussion Papers 7007, Institute for the Study of Labor (IZA).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Department of Treasury).
If references are entirely missing, you can add them using this form.