Parental Time

How Do Mothers Manage? Universal Daycare, Child Skill Formation, and the Parental Time-Education Puzzle (Download NEW Working Paper here); 2019 September

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 provides a framework for disentangling four relevant mechanisms for the puzzle, namely high-educated parents’ differing (1) time efficiency in child human capital production, (2) preferences for child human capital, (3) substitutability between time and market goods in child human capital production, and (4) wage. Mechanisms (1)-(3) offset high-educated parents’ higher opportunity costs of non-market activities (4), and help to explain how they respond differently to price shocks. Using microdata on young children, I assess the model’s predictions by exploiting an exogenous decrease in the daycare price in Québec. 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 or hiring 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 (1) stronger time efficiency in child skill formation for high-educated parents, (2) stronger preferences for child human capital of high-educated parents, (3) and a stronger complementarity between time and market goods in child human capital production for them. I use the structural estimates to assess how universal daycare shapes skill gaps in early childhood. The counterfactuals reveal that in explaining the skill gap after a daycare price decrease, the relative importance of the time efficiency and wage channels is 2:3, and that of the wage and preference channels is 1:3. This suggests that high-educated parents’ time efficiency advantage in child skill formation, besides their larger (wage-driven) parental investments and stronger preferences for human capital, is a crucial mechanism behind widening skill gaps in early childhood.