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

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu 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. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SThe 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.JEL Classification: J22, J13, H24

Iteration Capping for Discrete Choice Models Using the EM Algorithm

“…The simulations performed to illustrate performance of the algorithm 7 are based on the empirical design of Apps et al (2012), who use the latent class model to identify elasticities of female labor supply. The specification of their model is in line with other recent studies employing the latent class discrete choice models (Hansen and Liu, 2011;Pacifico, 2012), which makes this setup particularly interesting from the perspective of applied economic work.…”

“…The dataset used for the simulation study is drawn artificially -following Apps et al (2012), it contains 1500 agents deciding among 125 alternatives. The agents are randomly assigned to the latent classes, and their choices are drawn according to the class-specific preference parameters.…”

“…The agents are randomly assigned to the latent classes, and their choices are drawn according to the class-specific preference parameters. The preference parameters are chosen to resemble the empirical estimates corresponding to the original dataset of Apps et al (2012).…”

“…This bypasses optimization cycles over suboptimally populated classes in the initial stages of the routine, leading to substantial savings of computation time. The performance of the algorithm is assessed on a series of simulations based on the study of Apps et al (2012). I show that the enhanced algorithm is 3-5 times faster compared to the original routine, depending on the choice of internal optimizer.…”

The Effectiveness of Fiscal Stimuli for Working Parents

“…Furthermore, quasi-concavity of preferences need not be imposed ex ante, and therefore coherency of the model does not implicitly limit the range of behavioral responses that can be obtained (MaCurdy et al, 1990). We model unobserved heterogeneity using the latent classes approach as outlined in Train (2008) and Pacifico (2009), and recently applied to a model with maternal labor supply and childcare choices by Apps et al (2012). Latent classes are a flexible way of modelling unobserved heterogeneity, which can prove important for inference of the model (Pacifico, 2009).…”