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

20/08/2012 |  Shachar Ella
All Press Releases In Subject:
Welfare Policy and Labor Market
Abstract
This study examines the effect of the child care cost for children aged 0-4 on the female
labor supply. This paper analyzes the child care cost in Israel, compares it to OECD
countries, and surveys the current policy of supporting working families with children.
The findings emphasize the high expenses of child care in Israel in contrast to other
countries, against a background of a low take-up rate of existing programs. The study
estimates the elasticity of the probability of female labor force participation with respect
to the child care cost of young children. The estimations are based on the structural probit
model of labor force participation with sample selection correction, which is commonly
employed in studies on this topic. The results show that the child care cost has a
significant negative effect approximatly 14 percent on mother's employment (the child
care cost elasticity for labor force participation is -0.14). In addition it was found that the
shortage of places in subsidized child care establishments (based on a special index that
was developed in this study) significantly increases family child care expenditures.

 

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