Mothers Working during Preschool Years and Child Skills: Does Income Compensate?

Increasing mother’s labor supply during a child’s preschool years may reduce time investments, yielding a negative direct effect on midchildhood and teenage outcomes. But as mother’s work hours increase, income will rise. Can income compensate for the negative effect of hours? Our mediation analysis exploits exogenous variation in both mother’s hours and family income. Results suggest a negative, insignificant direct effect from increasing mother’s hours on child test scores. However, the positive mediating effect of income creates a positive total effect on test scores (26% of a standard deviation) for a 10-hour increase in mother’s weekly hours in preschool years.