This study investigates the effects of childcare on work and earnings of mothers in poor neighborhoods of Guatemala City. Recognizing that mother’s work status may depend on the availability of childcare, decisions to participate in the labor force and to use formal day care are modeled to allow for the possibility that they may be jointly determined. We then explore the impact of childcare prices on mother’s earnings, conditional on her decision to work. Also explored is whether a mother’s “status” within her household (as measured by the value of the assets she brought to her marriage) influences her entry into the labor force. The study uses a survey of 1,363 randomly selected mothers (working and nonworking) with preschool children collected in 1999 by the International Food Policy Research Institute (IFPRI). In this random sample of mothers with preschoolers, 37 percent worked for pay in the 30 days before the survey, employed in a variety of occupations and sectors. A wide range of childcare arrangements was used: own care of the child by the mother during work, a resident household member, a nonresident family member, a neighbor, the child being left alone at home, private formal day care, and government-sponsored public formal day care. Our results indicate that participation in the labor market and use of formal day care are, in fact, joint decisions for mothers. Life cycle and household demographic factors have important effects on both decisions. Maternal education is an important determinant of utilization of formal day care, but does not have large effects on whether she works for pay or not. Higher household wealth reduces her chances of working, presumably via an income effect. However, the value of assets she brought to her marriage increases the likelihood of her working. For formal day care, greater travel time from home reduces utilization of this type of care. Controlling for endogeneity of labor market participation and formal day care use, childcare prices have no impact on maternal earnings. This suggests that interventions to increase the availability of formal day care in poor urban areas have the potential to raise labor-force participation rates of mothers residing in such neighborhoods, but not necessarily their earnings, conditional upon their having entered the labor force.

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 Record created 2017-04-01, last modified 2017-04-04

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