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

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?

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 with better prospects for mothers of small children (availability of childcare and flexible jobs), have higher female labor supply and fertility rate

Childcare availability

Data Combine three data sources, Hungary : 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 ( ), commuting – Matched to LFS using settlement codes Wage and Employment Survey – Expected wage according to education, industry, etc.

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

Methodology: what happens at age 3? Increase in availability between nursery and kindergarten  effect on L S ? – 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?

Factors affecting childcare usage and mother’s labor market participation when child turns 3 Childcare availability Willingness to separate (Blaskó) -This factor is present and has a strong effect -Its timing is uncertain -Continuous variable Maternity leave -High-sum maternity support ends at age 2, no work allowed -Low-sum maternity support (~ 100 EUR) ends at age 3 -Mothers are allowed to work and receive low-sum support

Facts and Figures I.

Facts and Figures II.

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

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

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

Quasi-experiment: regression discontinuity design Random assignment would solve selection problem Can think of mothers of children aged 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

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

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

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 availability if: No nursery, but kindergarten available OR availability of kindergarten is higher

Strategy 2 Exploit gap between when child turns 3 (end of maternity leave) and kindergarten enrollment month (mostly in September)? Maternity leave Enrollm.01Total 03,13455,46858, ,266059,266 Total62,40055,468117,868

Preliminary results: activity by regular or late enrollment

Strategy 3 Available places in 2010: – in nurseries : – in family daycare: 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

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?

ANY COMMENTS ARE WELCOME! Thank you for your attention,