this model can be specified algebraically. Let equal income net of taxes and transfers, y less out-of-pocket childcare costs, equal leisure of the mother, equal a vector of l c childcare choices (formal, informal, maternal), and denote a particular combined choice j of labour, leisure and childcare. A household will choose choice over all other choices if j k it provides the most utility, That is: Uj. Observed and imputed wages (taken from the previously estimated wage equation) are combined with the number of work hours to derive the level of net income for each y potential labour and childcare choice All other variables (discussed below) do not vary j. across different hours worked and childcare combinations. The household utility function includes for hours worked per week (h), sole parent/maternal childcare hours per week (m), informal childcare hours per week (i) and income and transfers net of taxes and out-of-pocket childcare expenses (y). There are also squared terms for these variables. There are also cross-product terms between these variables and crossproduct terms between each of and and a number of h, y, m i demographic variables. The demographic variables include family characteristics such as the number of children in the household and whether the youngest child is aged 0–2 years, 3–4 years, 5–9 years or 10–14 years (omitted to ensure there is no collinearity). There are also interaction terms for age and age squared, as well as the highest educational attainment of the primary carer (diploma, vocational education or degree). A fixed cost of working parameter () is also included. The utility function (U) estimated for sole parents takes the form: Where to are the various cross product terms associated with the demographic X1 Xn variables (demographic variables multiplied by income, labour supply, hours of informal childcare, and hours of sole parent/maternal childcare). For couples, there are additional cross product terms for the husband. Table C.3 lists all utility function variables used. Table C.3 Variables included in the utility function regressions
this model can be specified algebraically. Let y equal income net of taxes and transfers, less out-of-pocket childcare costs, l equal leisure of the mother, c equal a vector of childcare choices (formal, informal, maternal), and j denote a particular combined choice of labour, leisure and childcare. A household will choose choice j over all other choices k if it provides the most utility, Uj. That is: Observed and imputed wages (taken from the previously estimated wage equation) are combined with the number of work hours to derive the level of net income y for each potential labour and childcare choice j. All other variables (discussed below) do not vary across different hours worked and childcare combinations. The household utility function includes for hours worked per week (h), sole parent/maternal childcare hours per week (m), informal childcare hours per week (i) and income and transfers net of taxes and out-of-pocket childcare expenses (y). There are also squared terms for these variables. There are also cross-product terms between these variables and crossproduct terms between each of h, y, m and i and a number of demographic variables. The demographic variables include family characteristics such as the number of children in the household and whether the youngest child is aged 0–2 years, 3–4 years, 5–9 years or 10–14 years (omitted to ensure there is no collinearity). There are also interaction terms for age and age squared, as well as the highest educational attainment of the primary carer (diploma, vocational education or degree). A fixed cost of working parameter () is also included. The utility function (U) estimated for sole parents takes the form: Where X1 to Xn are the various cross product terms associated with the demographic variables (demographic variables multiplied by income, labour supply, hours of informal childcare, and hours of sole parent/maternal childcare). For couples, there are additional cross product terms for the husband. Table C.3 lists all utility function variables used. Table C.3 Variables included in the utility function regressions
childcare-modelling-supplement.docx