Money vs. Time: Family Income, Maternal Labor Supply, and Child Development

University of Zurich, Department of Economics, Working Paper No. 273, Revised version

65 Pages Posted: 22 Jan 2018 Last revised: 8 Feb 2021

Date Written: February 2021

Abstract

This paper analyzes the relationship between work-promoting policies and child development. First, we provide new comprehensive evidence of the unintended consequences for child development of the Earned Income Tax Credit expansions during the 1990s in the United States. Second, our theory-driven empirical model reconciles this result by shedding light on the trade-off between the income effect (economic resources) and the substitution effect (time and quality of the parent-child interactions) on a child's cognitive and behavioral development. This money versus time trade-off is most pronounced for disadvantaged mothers. Overall, our results call for a policy debate on how to design targeted supplements for disadvantaged families to support working mothers and their children.

Keywords: Child development, family income, maternal labor supply

JEL Classification: H24, H31, I21, I38, J13, J22

Suggested Citation

Agostinelli, Francesco and Sorrenti, Giuseppe, Money vs. Time: Family Income, Maternal Labor Supply, and Child Development (February 2021). University of Zurich, Department of Economics, Working Paper No. 273, Revised version, Available at SSRN: https://ssrn.com/abstract=3102271 or http://dx.doi.org/10.2139/ssrn.3102271

Francesco Agostinelli (Contact Author)

University of Pennsylvania ( email )

Philadelphia, PA 19104
United States

Giuseppe Sorrenti

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

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