Collective Labor Supply and Child Care Expenditures: Theory and Application

In this study we examine the collective labor supply choices of dual-earner parents and take into account child care expenditures. For this purpose we use data of the Flemish Families and Care Survey (FFCS, 2004–2005). The main findings are, firstly, that the supply of paid labor is hardly affected by changes in the prices of child care services. Secondly, child care price effects on the individual labor supplies are much smaller than the wage effects. Thirdly, we find that additional earnings due to an increase in household non-labor income minus the child care expenditures are mainly transferred to the wife.