This paper considers the effect of child care costs on two labor market outcomes for single mothers whether to participate in the labor market and whether to receive welfare. Hourly child care expenditures are estimated for all women in the sample (using data drawn from the 1992 and 1993 panels of the SIPP), whether or not they are currently using nonmaternal child care. These expenditures are then included as an independent variable predicting the probability of welfare recipiency and the probability of labor force participation. Results show a substantial positive effect of child care costs on welfare recipiency, with a child care price elasticity of welfare recipiency equaling 0.28. The estimated child care price elasticity of employment equals -0.76, showing that controlling for the welfare choice does not reduce the price elasticity of employment found in other studies. Simulations based on these data from 1994 show that welfare recipiency is reduced by approximately one-third and employment increased by approximately 50 percent when child care expenditures are subsidized by 50 percent not a large subsidy considering that the weekly expenditure on child care was about $58. While this study relies on data collected prior to the 1996 federal welfare reform that block grants welfare dollars to the states, the results show the importance of child care to both the employment and welfare outcomes and imply that policymakers will continue to need to address child care concerns as state welfare policy evolves.
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Paper provided by W.E. Upjohn Institute for Employment Research in its series Staff Working Papers with number
01-69.
Length: Date of creation: Jan 2001 Date of revision: Handle: RePEc:upj:weupjo:01-69
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Find related papers by JEL classification: I3 - Health, Education, and Welfare - - Welfare and Poverty J2 - Labor and Demographic Economics - - Demand and Supply of Labor J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
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References listed on IDEAS 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 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.
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