The determinants and consequences of child care subsidies for single mothers in the USA

Abstract

This paper provides an analysis of child care subsidies under welfare reform. Previous studies of child care subsidies use data from the pre-welfare-reform period, and their results may not apply to the very different post-reform environment. We use data from the 1999 National Survey ofAmerica's Families to analyze the determinants of receipt of a child care subsidy and the effects of subsidy receipt on employment, school attendance, job search, and welfare participation. We analyze the impact on subsidy receipt of household characteristics such as family size and structure, and past participation in welfare. The most important determinant of receipt of a child care subsidy is past receipt, but we cannot determine from our analysis whether this is a causal effect or a result of unobserved heterogeneity. Ordinary least squares estimates that treat subsidy receipt as exogenous show an effect of subsidy receipt of about 13 percentage points on employment. Two stage least squares estimates that treat subsidy receipt as endogenous and use county dummies as identifying instruments show an effect of 32 percentage points. We present some evidence that is consistent with the assumption that county dummies are valid identifying instruments, and some evidence that is inconsistent with the assumption.

Taxing Childcare: Effects on Childcare Choices, Family Labor Supply, and Children

“…20 We can use our estimates to calculate the employment response to childcare prices compensated by an income transfer: there is no immediate response of female labor supply to the policy. Even one or two years after eligibility, we find that employment is with -0.14 and -0.15 very inelastic; our estimated elasticities are however in line with earlier studies using quasiexperimental evidence (Baker et al 2008;Blau and Tekin 2007). 21 The absence of a strong 19 The mean share of families using informal care in the pre-reform period is 41%, while 39% of families care for their child at home.…”

“…The results seem to suggest modest responses if at all. While a decline in childcare prices has little effect on female labor supply in Sweden (Lundin et al 2008;Brink et al 2007), low-income mothers in the United States show a modest response with estimated elasticities ranging from -0.1 to -0.3 (Blau and Tekin 2007).…”

Universal Child Care, Maternal Employment, and Children’s Long-Run Outcomes: Evidence from the US Lanham Act of 1940

“…The empirical framework models the employment decision using subsidy receipt as the key explanatory variable. The evidence suggests that CCDF-funded child care subsidies have large positive effects on the employment of economically disadvantaged single mothers (Tekin 2005(Tekin , 2007bBlau and Tekin 2007).…”

Enticing even higher female labor supply: the impact of cheaper day care

“…The combined result of the reform saw a fall in child care costs and a rise in capacity. 2 There is a substantial literature on the importance of child care costs on the female labor supply over the last two decades (see for example, Blau & Robbins 1988;Ribar 1992;Connelly 1992;Connelly & Kimmel 2003;Blau & Tekin 2007;Gelbach 2002;Blau 2003;Baker, Gruber, & Milligan 2008;Lefebvre & Merrigan 2008;Herbst 2010;and Cascio 2009). Despite the large number of studies, considerable uncertainty lingers about the magnitude of the maternal employment effect with respect to the price of child care (Blau 2003).…”