Price Of Child Care Research Articles

A New Era in the Not So New Economics of Fertility and Women's Time: An Introduction

AbstractThis article examines a new era of models predicting fertility decline reversal as female‐to‐male wages rise. Standard microeconomic frameworks and diagrams simplify theoretical concepts for students and policymakers. The analysis reveals how demand for children may increase when households substitute childcare for women's time. An income effect dominates when responsiveness of the input mix and preference for children are high. Challenging conventional assumptions unveils the importance of gender inequality at home, economies of scale in raising children, and market‐determined childcare prices. The findings suggest that household taxation and preferences influence how childcare subsidies and paid maternity leave shape fertility upturn.

Do means-tested childcare subsidies discourage work?

We examine how means-tested childcare subsidies affect parental labor supply. Using the introduction of reduced childcare prices for low-income families in Norway in 2015, we show that these subsidies may have the unintended effect of discouraging work rather than promoting employment. First, structural labor supply simulations suggest that a negative parental labor supply effect dominates, ex ante. Ex post, we find a small and insignificant effect of means-tested childcare subsidies on parental labor supply in the reform year. We find no statistically significant bunching around the income limits in subsequent years, but we do find negative labor supply effects in subsequent expansions of the reform. Our results suggest that in a context where both parental employment and participation in formal childcare are high, means-tested childcare subsidies may have unintended parental labor supply effects.

Direct or indirect subsidies? Optimal childcare subsidy and application to China

ABSTRACT This paper examines the optimal design of childcare subsidies and how subsidies are implemented. We combine the optimal subsidy model with the situation in China and construct the optimal childcare subsidy model using families as units. We discuss the selection patterns of direct and indirect subsidies and prove the applicable ranges and selection thresholds for different subsidy types. Based on the CFPS database in China, we simulate the amount of childcare subsidies for families with different levels of market productivity and calculate the optimal amount of subsidies for them. The results show that direct subsidies should be provided to families whose wages are lower than the market price of childcare. Indirect subsidies should be provided to families whose wages are above the market price for childcare. Finally, the optimal child-rearing subsidy curve is derived, and the easily identifiable macro optimal subsidy curve is designed for implementation.

Summaries of Articles

Summaries of Articles

Tax Credit Refundability and Child Care Prices: Evidence from California

A common critique of nonrefundable tax credits is that benefits are limited for low-income households. Costs often dominate the refundability debate, yet how much households benefit from refundability depends on the incidence of the credit in question. California provides a unique opportunity to study how eliminating refundability of child care tax credits affects child care prices while holding other policy dimensions fixed. Using county-level price and tax return data, this study finds that nonrefundability corresponds with lower child care prices. If the price response is symmetrical and quality adjustments are limited, refundability may benefit low-income families less than the cost of the program would suggest.

Does quality matter in determining child care prices? Evidence from private child care provision in Turkey

Child care prices are expected to reflect the quality of provision. However, in contexts where there are high information asymmetries between the users of the services and providers, we may expect this link between quality and prices to be weaker. Turkey is selected for the study as it has a highly regulated child care sector where the costs of accreditation and initial setup are high. However, there is very little on-going supervision and no information provided to users on the quality or ranking of these services. This paper investigates the role of quality in determining private child care prices using a unique provider-level data set collected in five provinces of Turkey. Regression results show that prices are mainly driven by infrastructure quality while human resources and curriculum and materials quality scores that are more likely to have a strong bearing on child development do not have a significant impact on prices.

Who's minding the kids? Experimental evidence on the demand for child care quality

Despite the well-documented benefits of high-quality child care, many preschool-age children in the U.S. attend low-quality programs. Accordingly, improving the quality of child care is increasingly an explicit goal of government policy. However, accomplishing this goal requires a thorough understanding of the factors that influence parents’ child care decisions. This paper provides the first evidence on the demand for child care characteristics in the market for home-based care. Using a randomized audit design, we study three dimensions of caregiving: affordability (i.e., the hourly price of child care), quality (i.e., caregiver education and experience), and convenience (i.e., caregiver car ownership and availability). We find that while parents are extremely sensitive to the cost of child care, they also have strong preferences for quality, particularly caregivers’ educational attainment. Furthermore, we obtain mixed results on the convenience dimensions of child care, with parents valuing those owning a car but not those with more availability. Finally, we find significant heterogeneity in child care preferences according to families’ age of youngest child, race and ethnicity, and willingness-to-pay. Our findings are consistent with the notion that the problem of low-quality in the U.S. child care market may be explained by lack of affordability or the informational resources to identify high-quality care, rather than an undervaluation of such care by parents.

All in the family? The community context of childcare options and parents’ childcare choices

ABSTRACT Childcare in the United States is an important issue impacting parents as they navigate a landscape characterized by challenging choices between parental care only, the price of paid childcare, and largely unpaid kin care. Drawing on guidance from the accommodation model, the current work extends the examination of childcare choices by including non-paid care and by using a sample of families across a broad range of incomes. Data from a statewide childcare survey linked to information regarding proximity of kin, unpaid childare, childcare prices, and other potentially relevant community characteristics are used in the empirical work. Multivariate analyses treat the mother’s employment decision and childcare choices as simultaneous decisions. We find that childcare choices are linked to community caracteristics inlcuding the price of licenced family-based childcare, proximity of kin, the percentage of adults in the community who have a college degree, and the community level unemployment rate. Our work suggests that childcare resource agencies should look at a range of community characteristics beyond area-level poverty rates when identifying communities of high need. The role of childcare information flows from the community to parents should also be the subject of future research.

Cash-for-Care, or Caring for Cash? The Effects of a Home Care Subsidy on Maternal Employment, Childcare Choices, and Children's Development

How parents respond to changes in the price of childcare is an important, though not fully understood, public policy question. Our paper provides new comprehensive evidence on how a home care subsidy jointly affects maternal labour market outcomes, childcare choices, and children’s development. We examine a German reform from 2013 which introduced a home care subsidy of initially 100 Euros per month for families who do not use subsidised childcare. Exploiting a date-of-birth cut-off in eligibility and using administrative data on employment and child development alongside survey data on childcare usage, we show that the reform reduced mothers’ likelihood to return to work within three years by only 1.4 percentage points, but decreased childcare enrolment for one- and two-year olds by 5 percentage points. We find no effect on children’s skill development at age six. Our findings imply that the subsidy accrued almost completely as windfall gains to families whowould not have used formal childcare anyway. (Author's abstract, IAB-Doku) ((en))

PENGARUH HARGA MENGASUH ANAK TERHADAP PARTISIPASI KERJA WANITA MENIKAH DI INDONESIA

The existence of young children is estimated to increase the reservation wages of a mother, this can reduce the possibility of their work participation in entering the labor market. This study aims to determine the effect of childcare price on the work participation of women who are married in Indonesia. Estimation of labor participation in this study uses a bivariate probit model in which decisions on work decisions are taken simultaneously with decisions on the choice of care type for women who are married. Because not all mothers in the sample work and use paid childcare, childcare wages and prices are estimated for all mothers. To overcome the sample selection bias, the two-stage Heckman method was used. The results of this study indicate that the price of childcare negatively affects the work participation of married women. Which means that if there is an increase in the price of caring a child, it will reduce the work participation of married women. Kata Kunci: Partisipasi kerja wanita, harga mengasuh anak

Optimal family taxation and income inequality

This paper presents the properties of optimal piecewise linear income tax systems for families, based on joint and individual incomes. It models the interaction between the wage rates of mothers as “second earners” and variation in child care prices and productivities as determinants of heterogeneity in second earner labour supply. We find that individual taxation welfare dominates joint taxation on grounds of both efficiency and equity. Heterogeneous labour supplies, the positive relationship between household wages and child care quality, and the sharp rise in wage rates in the top percentiles of the primary wage distribution account for this result. In addition to reducing the intra-household net-of-tax wage gap, individual taxation removes the opportunity for tax avoidance that income-splitting makes available to high-wage primary earners, leading to a much fairer distribution of the tax burden.

The rising cost of child care in the United States: A reassessment of the evidence

Anecdotal evidence suggests that the cost of child care in the U.S. has increased substantially over the past few decades. This paper marshals data from a variety of sources to rigorously assess the issue. It begins by using a large survey dataset to trace the evolution in families’ child care expenditures. I find that the typical family currently spends 14 percent more on child care than it did in 1990. This is less than half the increase documented in previous work. In addition, most families allocate approximately the same share of income to child care as they did several decades ago. The next section of the paper examines the trend in the market price of child care. The evidence suggests that after persistent, albeit modest, growth throughout the 1990s, market prices have been essentially flat for at least a decade. In the paper's final section, I analyze several features of the child care market that may have implications for prices, including the demand for child care, the skill-level of the child care workforce, and state regulations. A few findings are noteworthy. First, I show that child care demand stagnated around the same time that market prices leveled-off. Second, although the skill-level of the child care workforce increased in absolute terms, highly-educated women increasingly find child care employment less attractive than other occupations. Finally, child care regulations have not systematically increased in stringency, and they appear to have small and inconsistent effects on market prices. Together, these results indicate that the production of child care has not become more costly, which may explain the recent stagnation in market prices.

Optimal Family Taxation and Income Inequality

This paper presents the properties of optimal piecewise linear income tax systems for families based on joint and individual incomes respectively. It models the interaction between the wage rates of mothers as earners and variation in child care prices and productivities as determinants of across-household heterogeneity in second earner labour supply. We find that individual taxation welfare dominates joint taxation not only on the well-known grounds of efficiency but also of equity. An important driver of this result is the sharp rise in wage rates in the top percentiles of the primary wage distribution. In addition to reducing the intra-household net-of-tax wage gap, individual taxation removes the opportunity for tax avoidance income splitting makes available to high wage primary earners, leading to a much fairer distribution of the tax burden.

CHILD CARE PRICES AND MATERNAL EMPLOYMENT: A META‐ANALYSIS

AbstractThe literature estimates for labor force participation elasticity with regard to child care prices are extensive and varying. While some estimates imply substantial gains from child care subsidies, others find insignificant effects. To determine the causes of the variance, this paper reviews and analyzes the elasticity sizes using estimates from 36 peer‐reviewed articles and working papers in the literature. We start by reviewing the theoretical and empirical aspects related to participation elasticity with regard to child care costs, paying special attention to sample characteristics, methodological aspects, and macro level factors. We conclude by providing a meta‐regression using control variables based on our review of the literature to explain some of the differences between the estimates. As research builds on and improves the methods and assumptions in prior works, elasticity estimates have become smaller over time. This decline might also be partially explained by changes in labor market characteristics. In countries with high rates of part‐time work and very high or very low rates of female labor force participation, we find elasticity rates to be smaller.

Redistribution at the local level: the case of public childcare in Italy

We study attitude toward redistribution by local policy-makers in the context of public childcare in Italy. Within a substantially homogeneous legislative framework, different municipalities autonomously define how participation fees vary with a compound indicator of income and wealth (ISEE), thus redistributing resources across households using the service. The nearly one hundred municipalities we take into account exhibit wide heterogeneity in redistributive attitudes. We find statistically significant correlations with a number of individual characteristics of policy-makers and municipalities, but not with those of the ex ante distribution of income, which should be central according to both normative and positive theory. Since the price of public childcare is subsidized, resources are also redistributed from taxpayers to users. The evidence we find is consistent with the hypothesis that this type of redistribution is a public good.

Child care and parent labor force participation: a review of the research literature

Early care and education (ECE) enables parental employment and provides a context for child development. Theory suggests that lower child care costs, through subsidized care or the provision of free or low-cost arrangements, would increase the use of ECE and parents’ employment and work hours. This paper reviews the research literature examining the effects of child care costs and availability on parental employment. In general, research suggests that reduced out-of-pocket costs for ECE and increased availability of public ECE increases ECE attendance among young children, and has positive impacts on mothers’ labor force participation and work hours. However, there is considerable heterogeneity in findings. Among U.S. studies that report the elasticity of employment to ECE price, estimates range from −0.025 to −1.1, with estimates clustering near 0.05–0.25. This indicates that a 10 % reduction in the price of child care would lead to a 0.25–11 % increase in maternal employment, likely near 0.5–2.5 %. In general, studies using more recent data or data from non-U.S. countries find smaller elasticities than those using U.S. data from the 1990s. These differences may be due to historical and cross-national differences in ECE attendance, labor force attachment, and educational attainment among mothers with young children, as well as heterogeneity in the methodological approaches and data used across studies. More research in the U.S. using contemporary data is needed, particularly given recent changes in U.S. ECE policy.

Fertility and economic growth: the role of workforce skill composition and child care prices

This paper presents an overlapping generations model that incorporates choice of occupation (education), fertility, how to rear children, and a market for child care. The dynamic interplay between economic growth and fertility is examined as an economy moves through two phases distinguished by the skill composition of the workforce. In the initial phase, the economy comprises skilled and unskilled workers. In the second phase, all workers are skilled. Skilled workers are shown to have fewer children than less educated workers. Aggregate fertility initially declines as the fraction of skilled workers rises with economic growth, and then may recover as the fertility of a skilled workforce rises with skilled wages, for given child care prices. However, in equilibrium, child care prices rise proportionally to skilled wages when child care is produced with constant returns to skilled labour. Results indicate that whether or not the rise in fertility witnessed in high-income countries will continue depends on each country’s structure of child care.

Can Theory Explain the Evidence on Fertility Decline Reversal?

This article presents a model of household fertility and child-rearing choice in which rising female relative wages is the mechanism whereby economic growth may reverse fertility decline. I find that an increase in the logarithm, rather than the level, of wages affects fertility at advanced stages of development. Economic growth may reverse fertility decline beyond a threshold logarithm per capita output, which depends on child-care prices, maternity pay, preference for children and growth in female wages relative to male wages. These results inform the recent empirical debate and identify cross-country differences as important considerations for future empirical research.

Female Employment and Pre-Kindergarten: On the Uninteded Effects of an Italian Reform

We theoretically show that when mothers need to buy childcare services not only if they work but also if they want to search actively for a job, a reduction in the price of childcare will increase their likelihood of searching but may decrease their willingness to accept a job offer and therefore lower employment. We test these predictions empirically by means of a Regression Discontinuity design and find that the introduction in Italy of pre-kindergarten, a much cheaper alternative to day care for 2-year-old children, increased both participation in the labour market and employment of mothers of eligible children. This effect was driven largely by a significant decrease in the stated reservation wage.

Labor supply heterogeneity and demand for child care of mothers with young children

This paper presents a structural model of the labor supply and child care choices of partnered mothers with pre-school aged children. The father’s time-use decisions are taken as given. The main goal is to analyze the sensitivity of maternal time use to the price of child care, taxes, benefits and child care subsidies. To account for non-convexities in the budget sets, we specify a discrete choice model. We estimate the model on data on couples with young children from the HILDA survey representative of the Australian population, which contains detailed information on time use and bought-in child care. Simulations based on the estimated parameters show that the time decisions of mothers with pre-school children are highly sensitive to changes in wages and the cost of child care. Our results also suggest that lowering effective tax rates faced by partnered mothers as second earners, by switching from family payments that are targeted on joint incomes to payments that are universal and funded by a more progressive individual-based income tax, would lead to a substantial increase in their labor force participation and hours of work.