An up-to-date joint labor supply and child care choice model

Abstract

Norwegian parents of preschool children base their care choices on a completely different choice set from their predecessor. Now there is essentially only one type of nonparental carecenter-based careand on the parental side fathers take a more pivotal role in early childhood care. In the present paper we develop and estimate a joint labor supply and child care choice model that takes account of these new characteristics, on the assumption that this model points to current and future modeling directions for several other economies too. Estimations suggest that the average wage elasticity for mothers is 0.25-0.30.

An Up-to-Date Joint Labor Supply and Child Care Choice Model

“…For practical reasons, part-time and overtime work are the benchmark alternatives in the present specification, instead of the non-working alternative. This reflects a choice of normalization and does not influence results.29 A similar figure for the conventional model suggests weaker fit, seeThoresen and Vattø (2018). 30 Thus, close to a "prediction" counterpart to the description of actual choices in Table1.…”

“…38 Simulation results obtained by the restricted model (without endogenous labor supply of fathers) show a better fit to the quasi-experimental evidence for the mothers of 2-year-old children, and a worse fit for the mothers of 1-year-olds and the use of child care centers; see results in appendix in Thoresen and Vattø (2018). With respect to the use of center-based care, simulation by the alternative model predicts that participation in child care centers for 2-year-olds is 0.037, which exceeds the results reported in Table 9 (0.026).…”

“…As explained in the Introduction, we have also estimated a version of our model in which we diverge from the key role of fathers as care providers and consequently let their labor supply enter the model exogenously, referred to as the conventional approach. We refer to Thoresen and Vattø (2018) for further details of the alternative model, together with estimation results. A likelihood ratio test has been conducted to assess to whether our preferred model outperforms the alternative nested model, with "standard fathers" -the test gives clear support for our augmented model.…”

“…Note also that low responsiveness among fathers should not be interpreted as evidence of them playing an insignificant role in family care or the model performing equally well without endogenous male labor supply (as already discussed in Section 4). In fact, when neglecting the contribution of males (as implied by a conventional model), the wage responsiveness of females increases, to 0.178 and 0.144 for participation and hours, respectively; see more details in Thoresen and Vattø (2018).…”

“…We shall argue that our model represents a more realistic depiction of choices of parents of preschool children in the Norwegian context by, to some extent, contrasting it to estimation results and performance of a conventional model, i.e., a model where fathers' labor supply is exogenous. A detailed exposition of the specification and estimation results of the alternative model can be found in Thoresen and Vattø (2018). The specification of the conventional model is kept as close as possible to our suggested up-to-date model, except for the endogenous labor supply of the fathers and the possibility for parents to choose non-overlapping working hours.…”