Taxing Families: The Impact of Child-related Transfers on Maternal Labor Supply (PDF)
Revise & resubmit at AEJ: Macro
The employment rate of married women with and without pre-school children varies substantially across countries. To what extent can child-related transfers account for this variation? I develop a life-cycle model in which married couples jointly decide their labor supply, female human capital evolves endogenously, and some couples have access to grandparental childcare. I show that child-related transfers can explain most of the variation in the employment rates of married women, even after taking the labor income tax treatment and cross-country variation in childcare fees into account.
We document large dispersion in hours worked in the cross-section. We account for this fact using a model in which households combine market inputs and time to produce a set of non-market activities. To estimate the model, we create a novel data set that pairs market inputs and time use data at the activity level. We employ data from the Consumer Expenditure Survey and the American Time Use Survey, respectively. The estimated model can account for a large fraction of the dispersion of hours worked in the data. The large substitution between market inputs and time within an activity, for a sizable number of activities is key to our results. We show that models missing these features can only generate a third of the observed hours dispersion.
Work in Progress
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