Household productivity and its effects on labor force participation

A structural model of the head of the household\u27s time and dollar-expenditures shares on child-care services is derived and estimated in order to determine whether the technology of household-production exhibits economies of scale and scope. The components of this structural model are used to assess the effects of household-productivity and child-care subsidization on labor force participation.The components of the structural model include the reservation costs and the costs of market-produced child-care services. The reservation costs, derived in the study by relying on the duality theorems, are used to estimate the effects of household-productivity on labor force participation. These price factors that are related to market-produced child-care are used to estimate the effects of subsidization on labor force participation, independent of other factors. The study group, consisting of 1906 young heads of households, between fourteen and twenty-two years of ages, was selected from the Youth Cohort of the National Longitudinal Surveys of Labor Market Experience (NLS-Y).The findings reveal the presence of scale economies in the head of the household\u27s production of child-care services. Higher reservation costs, reflecting higher estimates of household-productivity, lower the household\u27s dollar-expenditures on market-produced child-care services. Among females, but not male youths, higher reservation costs also lower the labor force participation rate.For illustration, the minimum subsidy requirement associated with a ten percentage point increase in the female youths\u27 labor force participation rate is calculated. Higher reservation costs increase the minimum subsidy requirement