The child care industry has expanded rapidly in recent years as a result of growing labor force participation by mothers of young children. Much, but not all, of the child care is being provided through the market. In this paper, a model of family labor supply incorporating both market and nonmarket child care is specified and estimated. The empirical analysis is performed using data from the 1980 baseline household survey of the Employment Opportunity Pilot Projects. The results suggest that both the decision to become employed and the decision to purchase market child care are sensitive to child-care costs. The estimated price elasticity with respect to employment is -0.38 while respect to market care is -0.34.
Child-Care Costs and Family Labor Supply. David M. Blau and Philip K. Robins. The Review of Economics and Statistics , Vol. 70, No. 3 (Aug., 1988), pp. 374-381. Published by: The MIT Press.