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Child care and female employment decisions: A theoretical note

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  • Rammohan, Anu

Abstract

The empirical literature is divided over the issue of whether child care costs are a significant barrier to female employment. In this paper we develop a theoretical model that contributes to the literature (1) by allocating mother's time between work, leisure and child care and (2) by introducing the possibility of uncertainty in second period income because of a greater probability of divorce. We examine how these changes affect decisions on labour supply and purchase of child care. We show that although an increase in the price of child care reduces the demand for child care, it has an ambiguous impact on female employment decisions. From a policy point of view, this implies that government subsidies aimed at mitigating the cost of child care, may not have their desired impact in encouraging greater female labour force participation. However, an increase in the probability of child care unambiguously increases female labour supply and purchase of child care.

Suggested Citation

  • Rammohan, Anu, 2004. "Child care and female employment decisions: A theoretical note," Working Papers 3, University of Sydney, School of Economics.
  • Handle: RePEc:syd:wpaper:2123/7641
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    References listed on IDEAS

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    1. Deborah Cobb-Clark & Amy Liu & Deborah Mitchell, 1999. "Reassessing the Role of Child Care Costs in the Work and Care Decisions of Australian Families," CEPR Discussion Papers 409, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    2. Ribar, David C, 1995. "A Structural Model of Child Care and the Labor Supply of Married Women," Journal of Labor Economics, University of Chicago Press, vol. 13(3), pages 558-597, July.
    3. Hazel Bateman & John Piggott, 1997. "Private Pensions in OECD Countries: Australia," OECD Labour Market and Social Policy Occasional Papers 23, OECD Publishing.
    4. Deborah Schofield & Josh Polette, 1998. "Measuring the Impact of Child Care Subsidies on the Incomes of Mothers Returning to Work," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 31(1), pages 47-62.
    5. Connelly, Rachel, 1992. "The Effect of Child Care Costs on Married Women's Labor Force Participation," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 83-90, February.
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    Cited by:

    1. Guyonne Kalb & Wang-Sheng Lee, 2008. "Childcare Use And Parents' Labour Supply In Australia ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 272-295, September.
    2. Robert Breunig & Xiaodong Gong & Anthony King, 2012. "Partnered Women's Labour Supply and Child‐Care Costs in Australia: Measurement Error and the Child‐Care Price," The Economic Record, The Economic Society of Australia, vol. 88(s1), pages 51-69, June.
    3. Yin King Fok & Sung-Hee Jeon & Roger Wilkins, 2009. "Does Part-Time Employment Help or Hinder Lone Mothers Movements into Full-Time Employment?," Melbourne Institute Working Paper Series wp2009n25, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    4. Anu Rammohan & Stephen Whelan, 2006. "Child Care Costs and the Employment Status of Married Australian Mothers," CEPR Discussion Papers 517, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    5. Xiaodong Gong & Robert Breunig, 2012. "Estimating net chid care price elasticities of partnered women with pre-school children using a discrete structural labour supply-child care model," Treasury Working Papers 2012-01, The Treasury, Australian Government, revised Nov 2012.
    6. Xiaodong Gong & Robert Breunig & Anthony King, 2010. "New estimates of the relationship between female labour supply and the cost, availability, and quality of child care," Economic Roundup, The Treasury, Australian Government, issue 1, pages 51-62, April.
    7. Robert Breunig & Joseph Mercante, 2010. "The Accuracy of Predicted Wages of the Non-Employed and Implications for Policy Simulations from Structural Labour Supply Models," The Economic Record, The Economic Society of Australia, vol. 86(272), pages 49-70, March.
    8. Chikako Yamauchi, 2010. "The availability of child care centers, perceived search costs and parental life satisfaction," Review of Economics of the Household, Springer, vol. 8(2), pages 231-253, June.
    9. Ian Davidoff, 2007. "Evidence on the child care market," Economic Roundup, The Treasury, Australian Government, issue 1, pages 67-81, February.
    10. Ross Guest & Nick Parr, 2013. "Family policy and couples’ labour supply: an empirical assessment," Journal of Population Economics, Springer;European Society for Population Economics, vol. 26(4), pages 1631-1660, October.
    11. Xiaodong Gong & Robert Breuing, 2011. "Estimating Net Child Care Price Elasticities of Partnered Women With Pre-School Children Using a Discrete Structural Labour Supply-Child Care Model," CEPR Discussion Papers 653, Centre for Economic Policy Research, Research School of Economics, Australian National University.

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    Keywords

    childcare; female labour supply;

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