Author(s)  
Francesco Agostinelli, Giuseppe Sorrenti

We study the effect of family income and maternal hours worked on child development. Our instrumental variable analysis suggests different results for cognitive and behavioral development. An additional $1,000 in family income improves cognitive development by 4.4 percent of a standard deviation but has no effect on behavioral development. A yearly increase of 100 work hours negatively affects both outcomes by approximately 6 percent of a standard deviation. The quality of parental investment matters and the substitution effect (less parental time) dominates the income effect (higher earnings) when the after-tax hourly wage is below $13.50. Results call for consideration of child care and minimum wage policies that foster both maternal employment and child development.

JEL Codes  
H24: Personal Income and Other Nonbusiness Taxes and Subsidies; includes inheritance and gift taxes
H31: Fiscal Policies and Behavior of Economic Agents: Household
I21: Analysis of Education
I38: Welfare and Poverty: Government Programs; Provision and Effects of Welfare Programs
J13: Fertility; Family Planning; Child Care; Children; Youth
J22: Time Allocation and Labor Supply
Keywords  
Child Development
family income
maternal labor supply