Household Labor Supply, Child Development and Childcare Policies in the United States

Abstract

I study the dynamic relationship between parental labor supply, children's cognitive development and intra-household bargaining, by constructing a cooperative household model with endogenous outside options and limited commitment. The model incorporates rich preference heterogeneity, dynamic human capital accumulation for children and parents, endogenous wages, formal childcare, and periodic intra-household renegotiation. I use the estimated model to show that a budget-neutral modification of the 2023 Child Tax Credit could finance a generous childcare subsidy with limited or no work requirements, inducing substantial increases in female labor supply, persistent gains in child cognition and female bargaining power, and lower intra-household welfare inequality.

Keywords: household behavior, limited commitment, bargaining, labor supply, time allocation, child development, public policy.

JEL Classification: D13, D15, J13, J22, J24