Child Care and the Labor Supply of Married Women: Reduced Form Evidence

This paper empirically analyzes family demands for market and nonmarket child care services and the impact of these demands on the work effort of married women. The paper first develops a general model of child care and labor force participation. The model predicts that higher wages increase the likelihood of labor force participation and that higher costs decrease the likelihood of child care utilization. The paper then develops a three-equation, reduced-form econometric specification of the general model. The equations in the specification are estimated simultaneously using 1985 data from the Survey of Income Program Participation. The estimates reveal that the cost of market child care has a strong negative effect on the labor supply of married women.