CHILD SUPPORT AND MOTHERS' EMPLOYMENT

Previous research has found that child support receipts deter mothers' labor supply less than does other non-wage income. This paper argues that because child support is a variable income source, actual receipts may differ from unobservable permanent receipts on which hours worked are based. This introduces an errors-in-variables bias causing the estimated income effect of child support on hours worked to be biased toward zero. When one replaces actual receipts with predicted permanent receipts, such income effect is found to be statistically indistinguishable from that of other non-wage income. Copyright 1990 Western Economic Association International.