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

Research output: Contribution to journalArticle

36 Scopus citations

Abstract

This paper uses CPS and SIPP data between 1990 and 2004 to examine the effects of child care expenditures and wages on the employment of single mothers. It adds to the literature in this area by incorporating explicit controls for child care subsidies and the EITC into the estimation. Doing so provides an opportunity to examine mothers' sensitivity to prices and wages net of policies that influence these amounts. Results suggest that lower child care expenditures, higher wages, and more generous subsidy and EITC benefits increase the likelihood of employment. Allowing the impact of child care subsidies and the EITC to vary with expenditures and wages reveals substantial heterogeneity. In particular, the largest labor supply effects of child care subsidies are generated for mothers with higher child care costs, while the largest labor supply effects of the EITC are found for mothers with lower wages.

Original languageEnglish (US)
Pages (from-to)199-230
Number of pages32
JournalReview of Economics of the Household
Volume8
Issue number2
DOIs
StatePublished - Jun 1 2010

Keywords

  • Child care costs
  • Child care subsidies
  • EITC
  • Labor supply

ASJC Scopus subject areas

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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