The labor supply effects of child care costs and wages in the presence of subsidies and the earned income tax credit

Abstract

Child care costs, Child care subsidies, EITC, Labor supply,

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

“…Second, the QTE estimates for 1970 imply that the Lanham Act had negative effects on adult earnings starting at the 60th percentile. Such results are consistent with Havnes and Mogstad's (2015) QTE estimates for the Norwegian universal child care system, and they conform with recent US-based studies of pre-kindergarten programs (Cascio and Schanzenbach 2013) and nonparental child care arrangements (Herbst 2013), which uncover negative test score effects on children from more advantaged families.…”

“…The most common methodological approach to estimating price effects includes a discrete choice participation equation with selection-corrected predicted hourly child care expenditures and wages as the key right-hand-side variables. Results from these studies consistently point to a negative relationship between child care costs and mothers' employment (Anderson and Levine 2000;Connelly and Kimmel 2003;Tekin 2007a;Herbst 2010). However, the range of estimated own-price elasticities is quite large: 0.06 to 21.36.…”

“…For example, Baker et al (2008) provide evidence on the short-run developmental effects of universal child care in Quebec, Canada, while Gupta and Simonsen (2010) and Black et al (2014) provide medium-run evidence for the Danish and Norwegian systems, respectively. In the United States, Herbst andTekin (2012, 2016) estimate the short-and medium-run impact of the CCDF, a subsidy program restricted to the working poor, while a large number of studies examine the short-and medium-run impact of pre-kindergarten programs, only some of which are universal (e.g., Gormley and Gayer 2005;Fitzpatrick 2008;Barnett et al 2013;Cascio and Schanzenbach 2013;Weiland and Yoshikawa 2013). In addition, a noteworthy paper by Cascio (2009a), which estimates the long-run impact of kindergarten introduction in the United States, finds some positive effects for white adults but not for black adults.…”

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

“…Finally, for single mothers. Herbst (2010) reports elasticities in the lower end of the reported elasticities above (-0.05). In a sample of studies, summarised in Blau (2003), the reported estimated elasticities range from 0.06 to -1.26.…”

“…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).…”