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Working Paper

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This study investigates the effects of childcare on work and earnings of mothers in the slums of Guatemala City. Recognizing that mother’s work behavior may depend on the availability of childcare, the modeling approach allows participation in the labor force and use of formal daycare to be jointly determined. We also investigate whether a mother’s “status” within her household (as measured by the value of the assets she brought to her marriage) influences her entry into the labor force. Finally, we explore the impact of childcare prices on a mother’s earnings, conditional on her decision to work. The study uses a survey of 1,363 randomly selected mothers (working and nonworking) with preschool children carried out in 1999 by the International Food Policy Research Institute. In this sample, 37 percent of mothers with preschoolers worked for pay in the 30 days before the survey. Mothers were employed in a variety of occupations and sectors and used an assortment of different informal and formal childcare arrangements. Our results indicate that participation in the labor force and use of formal daycare are in fact joint decisions for mothers. Life-cycle and household demographic actors have important effects on both decisions. Maternal education is an important determinant of use of formal daycare, but does not have large effects on whether a mother works for pay or not. Higher household wealth reduces her chances of working. However, the higher the value of assets she brought to her marriage, the more likely she is to be working. Greater travel time from home to formal daycare reduces its use. Controlling for endogeneity of labor market participation and formal daycare use, childcare prices have no impact on maternal earnings. This suggests that policies to increase the availability of formal daycare in poor urban areas have the potential to raise labor force participation rates of mothers in such neighborhoods, but not necessarily their earnings conditional upon their entry into the labor force.