A Structural Model of Childcare, Welfare, and the Labor Supply of Single Mothers

Thomas Andrén ()

No 82, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: This paper considers the simultaneous relationship of the single mother’s decision to choose paid childcare, welfare participation and labor supply, and estimates a structural model that allows for a free error covariance. We use a discrete approach to the choice of labor supply together with the discrete choices of utilized paid childcare and welfare participation, which allow formulating the model as a multiple-choice problem. The results show that there is an association between social assistance, paid childcare and labor supply, but that the relationship is non-symmetric. An increase in the social assistance norms has a relatively small effect on paid childcare utilization, but a relatively larger effect on the mean labor supply. In contrast, a corresponding reduction in the childcare cost has a relatively large effect on the social assistance utilization but a relatively small effect on the mean labor supply. Our estimates suggest that a decrease in childcare cost increases the labor supply of those working rather than encourages non-workers to start work, which implies that childcare cost is foremost a barrier to fulltime work rather then a barrier to work at all.

Keywords: labor supply; paid childcare; welfare participation; structural model; simulated maximum likelihood; Halton draws (search for similar items in EconPapers)
JEL-codes: J13 J22 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2002-09-30
New Economics Papers: this item is included in nep-dcm, nep-lab and nep-ltv
Note: Published as "The choice of paid childcare, welfare, and labor supply of single mothers" in Labour Economics
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Published in Labour Economics, 2003, pages 133-147.

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:gunwpe:0082

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