The effects of formal and informal child care on the Mother's labor supply-Evidence from urban China

- I estimate the effects of informal and formal child care on mother labor supply.
- Data from RUMiC2008 are used.
- Both resident and nonresident grandparents are considered for informal child care.
- I find a positive effect of informal child care on mother labor supply.
- An insignificant effect of formal child care on mother labor supply is found.

The women's labor force participation rate in China has declined considerably during the last twenty years in urban China. Since the reforms started in the mid-1990s, publicly subsidized child care programs have decreased, and private care centers have increased. This might have increased the reliance of working mothers on informal child care and reduced their reliance on formal child care. Using post-reform data from the Project on Rural-Urban Migration in China (RUMiC) of 2008, I estimate the effects of formal and informal child care on the labor supply of mothers of young children. A recursive model with instrumental variables is employed to account for endogeneity. I find a positive and significant impact of informal child care in the form of grandchild care on the mother's labor force participation, while no significant effect of formal child care in the form of kindergartens or paid nannies. Considering recent tendencies in China to postpone retirement, one possible method to maintain mothers' presence in the labor market could be to reinforce the availability and affordability of formal child care.23