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Daycare, Durables, and Credit Constraints: Evidence from Rio de Janeiro

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  • Reimao, Maira Emy
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    There is some empirical evidence that access to daycare increases the incomes of households with young children, particularly through the expansion of female labor force participation in the extensive and intensive margins. Whether this boost persists even as children grow and enroll in school, however, is less clear. This paper uses data from the extension of a public daycare program in Rio de Janeiro in 2008 to study the impact of access to daycare not only on income, but also on households’ living standards in the short- and long-term. We find evidence that while participation in daycare increases income only in the short-run, its effect on the ownership of durable goods persists even once focal children are no longer age-eligible for daycare. Using a credit constraint framework, the results in the paper indicate that the small, temporary income increase provided by access to daycare has a long-lasting effect on living conditions and, consequently, child development, as it fills in a gap left by a lack of access to credit.

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    File URL: http://purl.umn.edu/170577
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    Paper provided by Agricultural and Applied Economics Association in its series 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota with number 170577.

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    Date of creation: 2014
    Handle: RePEc:ags:aaea14:170577
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    1. Sydney Ludvigson, 1999. "Consumption And Credit: A Model Of Time-Varying Liquidity Constraints," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 434-447, August.
    2. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    3. Michael Lokshin, 2004. "Household Childcare Choices and Women’s Work Behavior in Russia," Journal of Human Resources, University of Wisconsin Press, vol. 39(4).
    4. Milton Friedman, 1957. "The Implications of the Pure Theory of Consumer Behavior," NBER Chapters,in: A Theory of the Consumption Function, pages 7-19 National Bureau of Economic Research, Inc.
    5. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    6. Chase, R.S., 1995. "Women's Labor Force Participation During and After Communism: A Case Study of the Czech Republic and Slovakia," Papers 768, Yale - Economic Growth Center.
    7. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, Enero-Jun.
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