Female Employment and Child Care
I develop a dynamic model of labour supply, fertility, marriage, and child care decisions of women and men to estimate the degree of substitutability between paid child care and housework hours. I estimate the model using 1968-1996 waves of PSID. My estimates suggest that paid hours of child care are close substitutes to housework hours implying that subsidising child care should affect the take-up of child care. I then use the estimated model to evaluate the impact of child care subsidy programs on employment and wage profiles of women. The results indicate that such polices increase female employment and wages only if the cost of child care is not fully subsidised and the largest increase is observed for single women from lower education backgrounds.