Household Choices and Child Development∗

The growth in labor market participation among women with young children has raised concerns about the potential negative impact of the mother’s absence from the home on child outcomes. Recent data show that mother’s time spent with children has declined in the past decade and that indicators of children’s cognitive and noncognitive outcomes have worsened. The objective of our research is to estimate a model of the cognitive development process of children nested within an otherwise standard model of household life cycle behavior. The model generates endogenous dynamic interrela-tionships between the child quality and employment processes in the household that are found to be consistent with patterns observed in the data. Our results show that both parents ’ time inputs are important for the cognitive development of their chil-dren, with different impacts across different phases of the children’s life. Comparative statics exercises conducted using the estimated model show that increases in wages of the parents or household nonlabor income have small impacts on the child’s cognitive ability, reflecting counterbalancing effects on labor supply, time spent with the child, and expenditures on child investment goods. Quantitatively similar impacts are found both in one- and two-child households. The implication of these results is that pol-icy makers should carefully consider household responses when designing programs to improve child cognitive outcomes