Tímea Laura Molnár (Central European University), "Costs of Daycare, Complementarities, and Heterogeneous Productivity of Parenting Time in Child Skill Formation"

"Costs of Daycare, Complementarities, and Heterogeneous Productivity of Parenting Time in Child Skill Formation"

Tímea Laura Molnár (Central European University)
February 13, 2024, 12:00 to 1:00 PM
Leacock 429

Abstract: : I study two key features of child skill formation: whether parenting time and child market goods (e.g., daycare, books, toys) are complements, and whether high-educated parents’ time is more productive in it. I start with new reduced-form effects of cheaper daycare: (1) parents allocate more time to their children and buy more child market goods, and (2) high-educated parents increase their parenting time more. To explain these, I present a new model of parental time allocation, wherein productivity of parenting time (PPT) depends on parents’ education, innate parenting ability and effort, and mental health. My model’s structural estimates reveal that (i) parents perceive parenting time and child market goods as complements, and (ii) high-educated perceive their PPT as greater. My model explains (1)–(2) through an interaction between (i)–(ii): as daycare price falls, parents with greater PPT increase their parenting time more. If PPT is unaltered when daycare price falls, child skills increase more for high-educated parents’ children, where most of the increase stems from more parenting—and not daycare—time. Thus, complementarity magnifies the role of a daycare policy, and the greater PPT of high-educated exacerbates inequality and widens early skill gaps.