Childcare availability and female labor supply

1. Childcare availability and female labor supply Anna Lovasz - Agnes Szabo-Morvai The impact of day-care services on mothers’ employment, fertility, and redistribution in Visegrad countries - Workshop Budapest, March 30-31, 2012

2. Research question and literature • How does the lack of formal childcare availability constrain female labor supply? • International evidence that it does constrain: Apps&Rees 2001; Kimmel 1992,2001; Lokshin 2004 • Who is most affected by constraint? • By income, education level, region/settlement type, family status, age • Is the market for private daycare „stepping in” where public is insufficient? • Is this increasing inequality based on affordability?

3. Relevance • Policy issues: • Where to build kindergartens? • Who should pay and how much for nurseries? • Should market for private daycare be encouraged more (decrease administrative barriers, etc)? • Labor market activity • Bick, 2010: lack of subsidized childcare is a barrier to female labor supply • Connelly, 1992: higher child care costs are the primary reason of lower participation rate of mothers  Fertility • Apps & Rees, 2001, Del Boca and Sauer, 2009 : countries withbetter prospects for mothers of small children (availability of childcare and flexible jobs), have higherfemale labor supply and fertility rate

4. Childcare availability

5. Data Combine three data sources, Hungary 2002-2011: • Labor Force Survey • Household composition, labor status, children • Rotating panel, at most 6 quarters’ data about one household • T-STAR Geographical data • Nursery and kindergarten availability, family daycare (2008-2010), commuting • Matched to LFS using settlement codes • Wage and Employment Survey • Expected wage according to education, industry, etc.

6. Childcare scarcity in Hungary Utilization rate = enrolled children / available places Kindergarten: 69% Nursery: 99% Scarcity

7. Methodology: what happens at age 3? • Increase in availability between nursery and kindergarten  effect on LS? • Kindergarten should accept all children above 3 if open places left • Largest enrollment wave in September • Continuous enrollment if unfilled places • typically in lower quality kindergartens • often wait until next September, when kids leave for school • Problem: other effects at age 3 • Maternity leave ends • Willingness to separate from child?

8. Factors affecting childcare usage and mother’s labor market participation when child turns 3

9. Facts and Figures I.

10. Facts and Figures II.

11. Facts and Figures III. Don’t want; N.l. b/c childcare problem Don’t want; N.l. b/c NO childcare problem Work

12. Facts and Figures IV. Available Working Not looking b/c of child Not looking, but want

13. Ideal experiment and problems • Population of women who want a child (unobservable) • Assign children to them randomly (no sample selection) • Randomly offer them (group 1) or not (group 2) childcare (childcare availability is exogenous)  Compare the activity rate of group 1 & 2 • Problems in real life data: • Selection into motherhood • Endogeneity of childcare availability • Concurrent „treatment”: end of maternity leave • Usually tackled by parametric, multi-equation models • Selection into motherhood is usually not handled by these  We plan to take an approach that requires less behavioral assumptions but handles these problems

14. Quasi-experiment: regression discontinuity design • Random assignment would solve selection problem • Can think of mothers of children aged 2.7-3.3 as very similar, except: • Under 3: only nursery, low childcare availability (7% on average) • Over 3: kindergarten, high availability (83% on average) • In this „discontinuity sample”, assignment is random • Child age not correlated to characteristics that determine participation • Except: willingness to outsource daycare

15. Strategy 1 Kr: regional kindergarten availability: available kg places / number of children (or # of chilod-bearing age women) Nr: regional nursery school availability Gamma i: other parameters that affect availability

16. Local Average Treatment Effect Observed Activity rate LATE Unobserved 3 Age of youngest child

17. Preliminary results: activity rate by level of change in childcare availability • Availability: number of places / number of children in population of given age • Change in availabilityif:No nursery, but kindergarten available OR availability of kindergarten is higher

18. Strategy 2 • Exploit gap between when child turns 3 (end of maternity leave) and kindergarten enrollment month (mostly in September)? Maternity leave Enrollm. 0 1 Total 0 3,134 55,468 58,602 1 59,266 0 59,266 Total 62,400 55,468 117,868

19. Preliminary results: activity by regular or late enrollment

20. Strategy 3 • Available places in 2010: • in nurseries : 26.000 • in family daycare: 4.000 • appr. 15% increase in available places since 2007, with geographical differences • Source of variation: • geographical and time differences of childcare availability • regional differences in availability growth

21. Issues/questions • Develop model and RD design: what is treatment?  Exogenous change in change in availability (Ex: retirement of kindergarten teacher leads to closing)  Reduced form: we observe childcare availability and labor market participation, but do not observe actual enrollment for given mothers • Female labor supply or household decision model?  literature shows decisions made jointly when young children present (Lundberg 1988) • Fertility decision not modeled • Include family members: informal childcare • Childcare availability or affordability? • Availability at location: living or working?  use Kertesi et al.: composed small regions based on commuting data • Availability of flexible jobs?

22. Thank you for your attention, Any comments are welcome!