Abstract
This paper studies the effects of child disability on mothers’ participation in the labor force using Australian data. We formulate a bivariate Probit model in which mothers’ employment and welfare recipient status are treated as the dependent variables and child disability is responsible for the both dependent variables. Several propositions concerning the impacts of child disability on Australian mothers’ participation in the labor force are tested. Our testing procedure involves one-sided restrictions under the null or alternative hypotheses. Our main findings are as follows. A more severe child disability imposes greater restrictions on single mothers’ participation in the labor force. Single mothers are less likely than mothers with a partner to participate in the labor force in the event of a child health shock. There is some evidence of the disincentive effect of welfare payments in encouraging mothers’ participation in the labor force, particularly for single mothers.
Highlights
The relationship between child rearing and parental economic behavior has long attracted economists’ attention
We allow welfare payments to mothers to be endogenously determined with mothers’ labor supply, as well as allowing child disability to account for both labor supply and welfare payment
Unlike past studies where welfare is treated as an exogenous variable, this paper looks at the endogeneity of welfare payments
Summary
The relationship between child rearing and parental economic behavior has long attracted economists’ attention. In Australia the Federal Government introduced the Work for the Dole Act in 1997 for the first time in Australian history This development raises important questions such as how mothers’ labor market activities respond to child disability taking into account the influence of government welfare payments; whether a more severe child disability imposes more restrictions on the mother’s labor supply; and to what extent, if any, does a differential effect of child disability exist between a single mother and a mother with a partner since they are likely to have different government welfare entitlements. Wolfe and Hill (1995) and Lu and Zuo (2010) argue that partnered mothers having a disabled child are more likely to participate in the labor force than single mothers, whereas Powers (2001, 2003) argues the opposite.
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