David M. Blau

The Effect of Income on Child Development

This study presents estimates of the effect of parental income on childrens cognitive, social, and emotional development. The effect of current income is small, especially when income is treated as endogenous. The effect of permanent income is substantially larger, but relatively small when compared to the magnitude of recent policy-induced changes in income. Family background characteristics play a more important role than income in determining child outcomes. Policies that affect family income will have little direct impact on child development unless they result in very large and permanent changes in income.

A Time-Series Analysis of Self-employment in the United State

In the early 1970s the proportion of the nonagricultural labor force self-employed in the United States ceased its downward trend and has been rising ever since. This study provides an analysis of the causes of this change. A general-equilibrium model of self- employment and wage employment is analyzed, and aggregate U.S. time- series data are used to test predictions derived from the model. The empirical analysis indicates that changes in technology, industrial structure, tax rates, and social-security retirement benefits have contributed to the reversal of the previous downward trend, which had persisted for over a century. Copyright 1987 by University of Chicago Press.

Child-Care Costs and Family Labor Supply

This paper presents a theoretical and empirical analysis of the effects of child care costs on family labor supply and the demand for market child care. The model is a framework for cross-section estimation of the effects of child care costs on labor supply and child care use. It applies to households having young children requiring continuous care and in which both the mother and 1 other potential child care provider are present. The 3 potential sources of child care are the mother the potential informal provider and the market. Using data from the 1980 baseline household survey of the Employment Opportunity Pilot Projects this empirical analysis uses a subsample of 6170 households in which there is a married woman under age 45 with her spouse present at the time of the survey at least 1 child under age 14 and nonmissing data on key variables. Results show that 1) higher market child care costs discourage women from working even when an informal source of care is available indicating that such informal care is an imperfect substitute for market care; 2) a higher wage rate for the mother encourages her to work thus a higher wage rate increases the probability of using market child care; 3) the number of children requiring care has a negative impact on the probability of the women working with the largest impact caused by younger children; 4) nonwage income has a negative impact on the probability of the woman working; and 5) black women are more likely to work than whites and are statistically more likely than whites to use market child care if they do work. This family labor supply model predicts that the cost of market child care will affect household decisions on labor supply and child care use. Estimates of a qualitative choice model provide strong confirmation that child care costs affect such decisions. The responsiveness of the labor supply of mothers to child care costs demonstrated in this study indicate that such subsidies do have their intended effect of encouraging labor supply. The fact that a large proportion of current child care subsidies benefit primarily middle and upper income families via the income tax credit suggests that the labor supply effets of such subsidies may in practice be stronger for less needy families than for low income families. Employer-subsidized child care may become an increasingly popular tool for attracting mothers into the labor force.

Job Search Outcomes for the Employed and Unemployed

This paper examines how four components of the job search process--the choice of search methods, the choice of how many firms to contact, the rate at which offers are received, and the acceptance or rejection of an offer--influence the job-finding rate. A reduced-form model of job search is estimated that takes account of the fact that users of a particular method of job search are not a random subset of all searchers. The empirical analysis focuses on differences in search behavior between the employed and unemployed. A key finding of the analysis is that the offer rate per contact is greater for employed searchers than for unemployed searchers. This may be due to differences in the effectiveness of search while employed versus unemployed or to unobserved differences in search effort. Further research on this issue is needed because many models of job search behavior are based on the assumption that job search is more effective when one is unemployed.

The Demand for Quality in Child Care

We estimate a model of demand for quality‐related attributes of child care: group size, staff/child ratio, and provider training. The model is estimated jointly with equations for mode, expenditure on and hours of care, and the mothers labor supply. The results show that a lower price of child care in a particular mode leads to substitution toward that mode and an increase in the use of paid child care. A decrease in the price of care causes an increase in hours of care demanded and a decrease in the demand for qualityrelated attributes. Income effects on demand for quality are small.

Labor Force Dynamics of Older Married Couples

This article analyzes the dynamics of joint labor force behavior of older couples in the United States. Using the Retirement History Survey (RHS) I analyze the determinants of joint retirement and the effect of one spouses labor force status on the labor force transitions of the other spouse. The results reveal strong associations between the labor force transition probabilities of one spouse and the labor force status of the other spouse. These result from structural differences in exit and entry behavior by the spouses status. Several lagged endogenous variables have substantial effects on behavior even after controlling for unobserved heterogeneity.

Fertility, employment, and child-care costs.

A sample of labor-market and birth histories is used to estimate the effects of child-care costs on employment and fertility decisions. A reduced-form empirical analysis is performed, which is based on hazard functions for transitions among various fertility-employment states. Higher child-care costs result in a lower birth rate for nonemployed women but not for employed women. Higher child-care costs also lead to an increase in the rate of leaving employment and a reduction in the rate of entering employment. The results suggest that potential behavioral effects of child-care subsidies could be significant and should be taken into account when alternative child-care policies are being debated.

Retiree Health Insurance and the Labor Force Behavior of Older Men in the 1990s

We estimate the impact of employer-provided retiree health insurance (EPRHI) on the labor force transitions of men aged 51 to 62. Data from the Health and Retirement Survey provide detailed and accurate measures of retiree health insurance. Availability of EPRHI increases the rate of exit from employment by two percentage points per year if the individual shares the cost of the insurance with the firm, and by six percentage points if the firm pays the entire cost. The impact of cost-shared EPRHI on the annual rate of labor force exit increases with age, reaching 7.5 percentage points by age 61.

Retirement and Consumption in a Life Cycle Model

Consumption expenditure declines sharply at the time of retirement for many households, but the majority maintain a smooth consumption path. A simple life cycle model with uncertainty about the time of retirement can account for this pattern. A richer version of the model is calibrated to data from the Health and Retirement Study (HRS). The median change in consumption expenditure at retirement generated by the model is zero, while the mean is negative, matching the HRS data. However, the magnitude of the drop in consumption among households that experience a decline is too small in the model compared to the data.

THE ROLE OF RETIREE HEALTH INSURANCE IN THE EMPLOYMENT BEHAVIOR OF OLDER MEN

Using data from the Health and Retirement Survey, we estimate preference and expectations parameters of a structural model of the employment and medical care decisions of older men in order to evaluate the role of health insurance. The budget constraint incorporates detailed cost-sharing characteristics of private health insurance and Medicare as well as rules and requirements associated with Social Security and private pensions. Simulations imply that changes in health insurance, including access and restrictions to retiree health insurance and Medicare, have a modest impact on employment behavior among older males, with the greatest effect on men in bad health.