Child Care Markets, Parental Labor Supply, and Child Development

Samuel Berlinski,Maria Marta Ferreyra,Juan David Martin,Luca Flabbi

doi:10.1596/1813-9450-9427

Abstract

We develop and estimate a model of child care markets that endogenizes both demand and supply. On the demand side, families with a child make consumption, labor supply, and child-care decisions within a static, unitary household model. On the supply side, child care providers make entry, price, and quality decisions under monopolistic competition. Child development is a function of the time spent with each parent and at the child care center; these inputs vary in their impact. We estimate the structural parameters of the model using the 2003 Early Childhood Longitudinal Study, which contains information on parental employment and wages, child care choices, child development, and center quality. We use our estimates to evaluate the impact of several policies, including vouchers, cash transfers, quality regulations, and public provision. Among these, a combination of quality regulation and vouchers for working families leads to the greatest gains in average child development and to a large expansion in child care use and female labor supply, all at a relatively low fiscal cost.

Highlights

In the development of a child, parental inputs play a critical role.1 They include goods and services that can be bought in the market as well as parents’ time
Starting from the full dataset of the second wave, we arrive at our estimation sample by imposing three main restrictions: we focus on two-parent families with only one child, who is two years old; we focus on families in which the father works full time, and in which the mother either works full time or does not work; and we consider only two child care arrangements, namely parental care and child care center
Our slightly larger impact is due to two main differences relative to their study: we focus on two-parent households, and we allow both labor supply and child care supply to adjust in response to the policy

Summary

Introduction

In the development of a child, parental inputs play a critical role. They include goods and services that can be bought in the market as well as parents’ time. In the development of a child, parental inputs play a critical role.. In the development of a child, parental inputs play a critical role.1 They include goods and services that can be bought in the market as well as parents’ time. Both input types are intimately related to the labor market, since supplying labor in the market generates income and lowers the time available for children. Center-based care can be bought in the market to relax the constraint on parents’ time. Not surprisingly, increasing access to center-based care for families with young children is key to the debate on family-friendly policies.. Not surprisingly, increasing access to center-based care for families with young children is key to the debate on family-friendly policies.2 The objectives of those who support it are not always the same. The traditional argument is that increasing access to center-based care would raise female labor force participation, which would increase national output, favor the accumulation of human capital by women, and improve women’s economic self-sufficiency. More recent views have focused on the impact on center-based care on children, as high-quality child care for disadvantaged children has been shown to improve children’s skills and well-being, and to have positive long-term impacts.

Methods

Results

Conclusion