Female labor supply and child care

We use household income tax data to estimate a structural model of female labor supply and utilization of paid child care outside the home. We find that child care costs have little impact on the participation decision of mothers of young children. However, they influence hours of work, as well as the decision to utilize paid child care. We use our results to simulate various policy reforms. Suppressing the APE (Parental Education Aid) would cause the participation rate in our sample to rise by 4 points and the proportion of mothers using outside paid care to rise by 2 points. Examining the effects on aggregate female labor supply of other policies that affect child care costs, we generally find that intensive effects caused by changes in working time are of the same order of magnitude as extensive effects due to changes in female participation.