Purchased child care,optimal family size and mother's employment Theory and econometric analysis

The paper develops a model of family size decisions in which couples choose explicitly a combination of mother's time and purchased childcare (e.g. childminders, nannies) for the care and rearing of children. The theoretical model implies that the impact of the mother's wage on her completed fertility varies with the market price of childcare, and that this effect increases (becoming less negative or more positive) with the level of her wage. Econometric analysis of British micro-data confirms the main predictions of the model.I am grateful to Robert E. Wright for research assistance, and to the Economic and Social Research Council for supporting this research as part of the research programme Income Inequality, Gender and Demographic Differentials. Financial support from the Nuffield Foundation grant no. PT/9, Family Formation and Employment Activity is also gratefully acknowledged.