Joint Labor Supply and Childcare Choice Decisions of Married Mothers

This paper examines the impact of childcare prices and wage rates on the joint employment and childcare mode (center, sitter, relative, and husband) choice decisions of married mothers by estimating both a mixed logit and universal logit choice model. Data are drawn from the 1988 Canadian National Child Care Survey and the 1988 Labour Market Activity Survey. The estimation results show that wages have a positive impact on the probability of choosing any of the working states and that childcare prices for center, sitter, and relative care reduce the probability of working and using each respective mode of care. Sensitivity analyses reveal that the wage elasticity for employment is fairly robust across model specifications, while the own-price elasticity of childcare is sensitive to model specification, differing identifying assumptions in the estimation of childcare price equations, and sample selection. The simulation results show that differences exist in the degree to which government subsidies in the form of wage subsidies, targeted childcare subsidies, or unconditional childcare subsidies, impact on labor supply decisions and decisions to substitute across different modes of care by those mothers already in the labor market.