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Two birds with one stone: Female labor supply, fertility, and market childcare

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  • Hwang, Jisoo
  • Park, Seonyoung
  • Shin, Donggyun

Abstract

The correlation between the female labor force participation rate (FPR) and the total fertility rate (TFR) has switched from negative to positive in some developed countries. In this paper, we show how increasing the substitutability between maternal time and market childcare can raise both FPR and TFR, and provide an explanation for the change in the TFR-FPR correlation. Simulations of a life-cycle model of married women’s work and fertility decisions indicate that the FPR increases, whereas the TFR is U-shaped with regard to substitutability. The dynamic relationship depends on the relative strength of behavioral and composition effects: greater substitutability allows working women to have more children but it also attracts less productive women to enter the labor force, who trade childbirths for labor supply. The findings imply that raising substitutability to a sufficiently high level can achieve the two seemingly conflicting goals—increasing female labor force participation and fertility rates.

Suggested Citation

  • Hwang, Jisoo & Park, Seonyoung & Shin, Donggyun, 2018. "Two birds with one stone: Female labor supply, fertility, and market childcare," Journal of Economic Dynamics and Control, Elsevier, vol. 90(C), pages 171-193.
  • Handle: RePEc:eee:dyncon:v:90:y:2018:i:c:p:171-193
    DOI: 10.1016/j.jedc.2018.02.008
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    References listed on IDEAS

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    Cited by:

    1. Wang, Ruiting & Xu, Gang, 2020. "Can child allowances improve fertility in a gender discrimination economy?," Economic Modelling, Elsevier, vol. 93(C), pages 162-174.

    More about this item

    Keywords

    Female labor supply; Total fertility rate; Childcare substitutability;

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • D10 - Microeconomics - - Household Behavior - - - General

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