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Labor supply heterogeneity and demand for child care of mothers with young children

Author

Listed:
  • Patricia Apps

    (Sydney University Law School
    IZA)

  • Jan Kabátek

    (IZA
    University of Melbourne
    Netspar)

  • Ray Rees

    (University of Munich)

  • Arthur Soest

    (IZA
    Netspar
    Tilburg University)

Abstract

This paper presents a structural model of the labor supply and child care choices of partnered mothers with pre-school aged children. The father’s time-use decisions are taken as given. The main goal is to analyze the sensitivity of maternal time use to the price of child care, taxes, benefits and child care subsidies. To account for non-convexities in the budget sets, we specify a discrete choice model. We estimate the model on data on couples with young children from the HILDA survey representative of the Australian population, which contains detailed information on time use and bought-in child care. Simulations based on the estimated parameters show that the time decisions of mothers with pre-school children are highly sensitive to changes in wages and the cost of child care. Our results also suggest that lowering effective tax rates faced by partnered mothers as second earners, by switching from family payments that are targeted on joint incomes to payments that are universal and funded by a more progressive individual-based income tax, would lead to a substantial increase in their labor force participation and hours of work.

Suggested Citation

  • Patricia Apps & Jan Kabátek & Ray Rees & Arthur Soest, 2016. "Labor supply heterogeneity and demand for child care of mothers with young children," Empirical Economics, Springer, vol. 51(4), pages 1641-1677, December.
    • Handle: RePEc:spr:empeco:v:51:y:2016:i:4:d:10.1007_s00181-015-1046-4
    DOI: 10.1007/s00181-015-1046-4
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    Cited by:

    1. de Boer, Henk-Wim & Jongen, Egbert L.W. & Kabatek, Jan, 2022. "The effectiveness of fiscal stimuli for working parents," Labour Economics, Elsevier, vol. 76(C).
    2. Kai-Uwe Müller & Katharina Wrohlich, 2016. "Two Steps Forward—One Step Back? Evaluating Contradicting Child Care Policies in Germany," CESifo Economic Studies, CESifo Group, vol. 62(4), pages 672-698.
    3. Marc K. Chan & Robert Moffitt, 2018. "Welfare Reform and the Labor Market," Annual Review of Economics, Annual Reviews, vol. 10(1), pages 347-381, August.
    4. Geyer, Johannes & Haan, Peter & Wrohlich, Katharina, 2015. "The effects of family policy on maternal labor supply: Combining evidence from a structural model and a quasi-experimental approach," Labour Economics, Elsevier, vol. 36(C), pages 84-98.
    5. Thoresen, Thor O. & Vattø, Trine E., 2019. "An up-to-date joint labor supply and child care choice model," European Economic Review, Elsevier, vol. 112(C), pages 51-73.
    6. Eleonora Matteazzi & Ariane Pailhé & Anne Solaz, 2013. "Does Part-Time Employment Widen the Gender Wage Gap? Evidence from Twelve European Countries," Working Papers 293, ECINEQ, Society for the Study of Economic Inequality.
    7. Ray Rees & Thor O. Thoresen & Trine E. Vattø, 2023. "Alternatives to Paying Child Benefit to the Rich: Means‐Testing or Higher Tax?," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 56(3), pages 328-354, September.
    8. Eliane El Badaoui & Eleonora Matteazzi, 2014. "To be a Mother, or not to be? Career and Wage Ladder in Italy and the UK," EconomiX Working Papers 2014-30, University of Paris Nanterre, EconomiX.
    9. Tibor Paul Hanappi & Sandra Müllbacher, 2016. "Tax incentives and family labor supply in Austria," Review of Economics of the Household, Springer, vol. 14(4), pages 961-987, December.
    10. Kabatek, J., 2013. "Iteration Capping For Discrete Choice Models Using the EM Algorithm," Discussion Paper 2013-019, Tilburg University, Center for Economic Research.
    11. Johannes Geyer & Peter Haan & Katharina Wrohlich, 2014. "The Effects of Family Policy on Mothers' Labor Supply: Combining Evidence from a Structural Model and a Natural Experiment," Discussion Papers of DIW Berlin 1366, DIW Berlin, German Institute for Economic Research.
    12. repec:zbw:rwirep:0418 is not listed on IDEAS
    13. Karen Mumford & Antonia Parera‐Nicolau & Yolanda Pena‐Boquete, 2020. "Labour Supply and Childcare: Allowing Both Parents to Choose," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(3), pages 577-602, June.
    14. YOKOYAMA, Izumi & 横山, 泉, 2015. "The Impact of Tax Reform in Japan on the Work-Hour and Income Distributions of Married Women," Discussion Papers 2015-02, Graduate School of Economics, Hitotsubashi University.
    15. Colella, Fabrizio, 2014. "Women's Part-Time - Full-Time Wage Differentials in Europe: an Endogenous Switching Model," MPRA Paper 55287, University Library of Munich, Germany.
    16. Lars Kunze & Nicolai Suppa, 2013. "Job Characteristics and Labour Supply," Ruhr Economic Papers 0418, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    17. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    18. World Bank Group, 2016. "Activation and Public Employment Services in Poland," World Bank Publications - Reports 29831, The World Bank Group.
    19. Yokoyama, Izumi, 2018. "How the tax reform on the special exemption for spouse affected the work-hour distribution," Journal of the Japanese and International Economies, Elsevier, vol. 49(C), pages 69-84.
    20. Gert Thielemans & Dimitri Mortelmans, 2019. "Female Labour Force Participation After Divorce: How Employment Histories Matter," Journal of Family and Economic Issues, Springer, vol. 40(2), pages 180-193, June.

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    More about this item

    Keywords

    Time use; Income tax; Child care subsidies;
    All these keywords.

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

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