Abstract: The classic Beckerian framework suggests that high-educated parents, who spend less time on home production and leisure but more on work, should spend less time with their children, since their non-market activities have higher opportunity costs. However, previous research finds the opposite, leading to a “parental time-education gradient” puzzle. I develop a model of intra-household time and resource allocation that explains this puzzle. This model offers a mechanism based on heterogeneous time efficiency in non-market activities, which accounts for high-educated parents responding differently to price shocks. Using microdata on young children, I confirm the model’s predictions by exploiting an exogenous decrease in the daycare price in Quebec. I find that parents increase time devoted to their children at the expense of home production while consuming more home production market goods (eating out, domestic help) and child market goods (daycare, games, and toys). I find time reallocation to be larger for high-educated parents. I use the model to estimate structural parameters, which uncover the pivotal role of complementarity between time and market goods in child human capital production, and substitutability in home production. These structural estimates also suggest a time efficiency advantage in child skill formation for high-educated parents, outweighing their higher opportunity cost of time. I use the structural estimates to assess how universal daycare shapes skill gaps in early childhood. My findings point to differential parental investment and differential time efficiency as important mechanisms behind widening skill gaps in early childhood.