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Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children

Author

Listed:
  • Apps, Patricia

    (University of Sydney)

  • Kabátek, Jan

    (University of Melbourne)

  • Rees, Ray

    (University of Munich)

  • van Soest, Arthur

    (Tilburg University)

Abstract

This paper introduces a static structural model of hours of market labor supply, time spent on child care and other domestic work, and bought in child care for married or cohabiting mothers with pre-school age children. The father's behavior is taken as given. The main goal is to analyze the sensitivity of hours of market work, parental child care, other household production and formal child care to the wage rate, the price of child care, taxes, benefits and child care subsidies. To account for the non-convex nature of the budget sets and, possibly, the household technology, a discrete choice model is used. The model is estimated using the HILDA dataset, a rich household survey of the Australian population, which contains detailed information on time use, child care demands and the corresponding prices. Simulations based on the estimates show that the time allocations of women with pre-school children are highly sensitive to changes in wages and the costs of child care. A policy simulation suggests that labor force participation and hours of market work would increase substantially in a fiscal system based solely on individual rather than joint taxation.

Suggested Citation

  • Apps, Patricia & Kabátek, Jan & Rees, Ray & van Soest, Arthur, 2012. "Labor Supply Heterogeneity and Demand for Child Care of Mothers with Young Children," IZA Discussion Papers 7007, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp7007
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Kabatek, J., 2013. "Iteration Capping For Discrete Choice Models Using the EM Algorithm," Discussion Paper 2013-019, Tilburg University, Center for Economic Research.
    10. 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.
    11. 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).
    12. 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.
    13. 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.
    14. Hassani Nezhad, Lena, 2020. "Female Employment and Childcare," IZA Discussion Papers 13839, Institute of Labor Economics (IZA).
    15. 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.
    16. repec:zbw:rwirep:0418 is not listed on IDEAS
    17. 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.
    18. 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.
    19. World Bank Group, 2016. "Activation and Public Employment Services in Poland," World Bank Publications - Reports 29831, The World Bank Group.
    20. 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.

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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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