The Effect of Childcare Cost on the Labor Supply of Mothers with Young Children

12/07/2017 |  Shachar Ella
All Publications In Subject:
Welfare Policy and Labor Market
 
Abstract
 
This study examines the effect of the cost of childcare for children aged 0-4 on the labor supply of mothers. This paper analyzes childcare cost in Israel, compares it to the OECD countries, and surveys the current policy of supporting working families with children. The findings emphasize the high cost of childcare in Israel in comparison with other countries, given the low take-up rate of existing programs. The study estimates the elasticity of female labor force participation with respect to the cost of care for young children. As usual in studies of this type, the estimations are based on the structural probit model of labor force participation, with a correction for sample selection. The results show that the cost of childcare has a significant negative effect on the employment of mothers with young children —the elasticity of the cost of childcare with respect to labor force participation is -0.14. In addition, it was found that the shortage of places in subsidized childcare facilities (based on a special index developed in this study) significantly increases family childcare expenditures.

 

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