Child Care and Labour Market Participation in France: Do Monetary Incentives Matter?

This paper presents a model of the child care arrangements and labour supply of mothers with young children (under three). We use French data to estimate simultaneously mothers' labour force participation and type of child care chosen. The independent variables include estimated child care costs and mothers' potential incomes obtained by simulating the benefits and taxes associated with different participation choices (working full-time, part-time or out of the labour market). Availability of free child care (from family and relatives) is also taken into account. We show that monetary incentives do play a role. Child care costs have a direct effect on mothers' labour market participation but not on the type of child care chosen. Household disposable income and potential wages explain participation and type of child care whereas the marginal tax rate was found to have a significant effect only on the full-time versus part-time decision