An Analysis of Women's Labor Force Participation Following First Birth

Abstract

Women's labor force participation rate has increased sharply over the last two decades. The increase has been particularly dramatic for married women with young children suggesting that women are spending less time out of the labor force for child-bearing and rearing. Using the relatively detailed information available in the National Longitudinal Survey of Youth, this paper explores women's decisions to return to work within one year of the birth of their first child, focusing particularly on the effect of child care costs. By constructing two indices of child care cost across states, I am able to utilize instrumental variables estimation to reduce the effect of measurement error on the estimated influence of child care cost. Consistent with economic theory, women who face lower child care costs are more likely to return to work after giving birth as are women with higher potential wages and lower family income from other sources.