Money vs. Time: Family Income, Maternal Labor Supply, and Child Development
University of Zurich, Department of Economics, Working Paper No. 273
79 Pages Posted: 22 Jan 2018
Date Written: January 2018
We study the effect of family income and maternal hours worked on child development. Our instrumental variable analysis suggests different results for cognitive and behavioral development. An additional $1,000 in family income improves cognitive development by 4.4 percent of a standard deviation but has no effect on behavioral development. A yearly increase of 100 work hours negatively affects both outcomes by approximately 6 percent of a standard deviation. The quality of parental investment matters and the substitution effect (less parental time) dominates the income effect (higher earnings) when the after-tax hourly wage is below $13.50. Results call for consideration of child care and minimum wage policies that foster both maternal employment and child development.
Keywords: child development, family income, maternal labor supply
JEL Classification: H24, H31, I21, I38, J13, J22
Suggested Citation: Suggested Citation