A growing literature documents the importance of family investments for child development (see surveys by Cunha et al. 2006, Heckman and Mosso 2014), with parental time becoming an increasingly important form of investment (Lee and Bowen 2006, Del Boca et al. 2014, Carneiro et al. 2015, Caucutt et al. 2020). Caucutt et al. (2020) document that more than two-thirds of all family expenditures on child development (for children aged 12 or under) are in the form of parental time investments.
As more and more mothers have entered the labour force over the last few decades, it is important to ask what effects this increased participation has had on children. On one hand, these families have more financial resources; on the other hand, these children may spend less time with their working mother.
It is tempting to assume that the more time mothers spend working, the less they must spend with their children. Yet, such an assumption is clearly at odds with the time series for female labour supply and time with children, which have both increased substantially in recent decades. Cross-sectional relationships are also at odds with a direct trade-off. For example, Guryan et al. (2008) show that more educated parents both work more and spend more time with their children compared to less-educated parents. Clearly, parents devote time to many leisure and home production activities besides childcare (Becker 1965, Kooreman and Kapteyn 1987, Aguiar and Hurst 2007), and these activities trade off with work.
Understanding parental (especially maternal) time allocation decisions is critical for understanding the impacts of tax and transfer policies, including many welfare-to-work initiatives, on investments in children and child development. The Earned Income Tax Credit (EITC) is one of the most significant tax/transfer policies in the US, impacting millions of low- to middle-income families. Dahl and Lochner (2012, 2017), Chetty et al. (2011), Bastian and Michelmore (2018), Manoli and Turner (2018) and Agostinelli and Sorrenti (2018) estimate positive impacts of EITC expansions on the test scores, educational attainment, employment, and earnings of economically disadvantaged children. These studies emphasise the increase in financial resources for families that benefit from EITC expansions, with much of the increase in family income coming from greater labour force participation and higher pre-tax family earnings. Agostinelli and Sorrenti (2018) and Bastian and Michelmore (2018) raise concerns that the additional time mothers spend working could offset the benefits associated with greater financial resources. Indeed, several studies estimate negative effects of full-time maternal employment on child development (Ruhm, 2004; Bernal, 2008).
Even if the EITC increases maternal labour supply by increasing net-of-tax wages for low-income families, it need not reduce parental time investments in children. The positive income effects from higher wages can create incentives to increase overall investments in children. As shown by Caucutt et al. (2020), if all investment inputs are sufficiently complementary, families may wish to increase all types of investments, including time investments, despite the increase in their opportunity costs. Thus, higher wages may cause parents to substitute leisure and home production for time at work with little, or even positive, effects on time spent with children. Indeed, Kooreman and Kapteyn (1987) and Kimmel and Connelly (2007) estimate that increases in maternal wages lead to reductions in time devoted to leisure and home production but much weaker or even modest positive effects on childcare.
Looking more directly at impacts of the EITC, studies spanning three decades of research have consistently concluded that it raises employment among single mothers (Eissa and Liebman 1996, Meyer and Rosenbaum 2001, Grogger 2003, Hoynes and Patel 2018, Bastian 2020, Bastian and Jones 2020). Much less is known about changes in other uses of time. Looking at a broader set of tax policies, Gelber and Mitchell (2012) estimate that policies which encourage maternal labour supply also reduce time spent on home production. In their analysis of the EITC using data from the Panel Study of Income Dynamics, Bastian and Michelmore (2018) estimate modest and statistically insignificant effects of EITC expansions on the time parents spend with their children; however, their sample size is small and the estimates imprecise.
In a new paper (Bastian and Lochner 2020), we use the 2003-2018 American Time Use Surveys (ATUS) to study, in detail, the time allocation responses of mothers to state and federal expansions in the EITC with an emphasis on time spent with children. We estimate the effects of changes in the maximum EITC benefit level (by state, year, and family composition) on time spent in different activities, accounting for observed family demographic characteristics and unobserved differences across states over time (i.e. state x year fixed effects). This specification leverages differential EITC benefit amounts offered to families of different sizes across states and over time. Using detailed information from ATUS on respondents' activities and who they were with during each activity, we estimate the same specifications for a variety of time allocation activities, with and without children.
We begin by confirming the overwhelming consensus that the EITC encourages labour market participation among single mothers. Every $1,000 increase in the maximum possible EITC benefits that an unmarried woman could receive increases employment by 3 percentage points. These results are based on more recent years than most previous studies and are robust to standard survey-based measures of work (from the Current Population Survey) or non-standard measures based on time diaries in ATUS. This increased time devoted to work is shown to come at the expense of both leisure and home production activities. These activities are most strongly curtailed when mothers are with their children, raising concerns about adverse effects on child development.
We focus on closely examining how maternal time with children changes in response to EITC expansions, exploring detailed impacts on child investment (e.g. reading, helping with homework, playing, arts and crafts, or providing medical care) versus non-investment activities. Our study finds robust evidence that unmarried mothers respond to increases in the EITC by scaling back time with their children, especially pre-schoolers. Every $1,000 increase in the maximum possible EITC benefits that an unmarried woman could receive decreases average weekly hours spent with children by two hours. This decrease in time consists primarily of passive non-investment activities, including housework, shopping, waiting, and relaxing when with their children.
Interestingly, despite negative effects of EITC benefit levels on the time single mothers spend with their children (especially young mothers and children), we estimate negligible effects of the EITC on time devoted to active investment activities such as reading with their children, helping them with their homework, playing sports or engaging in arts and crafts with them. Every $1,000 increase in the maximum possible EITC benefits that an unmarried mother could receive decreases weekly investment hours by an insignificant 0.1 hours. Indeed, unmarried mothers spend more time actively playing with their children in response to EITC expansions, although these estimates are not statistically significant. Interestingly, both married and unmarried mothers respond to EITC expansions by spending less time providing or obtaining medical care for their children, which may reflect general improvements in children's health – presumably due to higher family income levels – as estimated by Hoynes et al. (2015), Averett and Wang (2018), and Braga et al. (2019).
Altogether, this area of research suggests that while expansions of the EITC draw single mothers into the labour market and away from their children, the adverse developmental consequences are likely to be quite limited, since reductions in time spent with children do not appear to be very investment-oriented. The results in our paper are consistent with previous studies establishing that the EITC has positive short- and long-run effects on children growing up in lower-income families, suggesting that greater financial resources appear to dominate decreases in time with parents (Dahl and Lochner 2012, 2017, Chetty et al. 2011, Bastian and Michelmore 2018, Manoli and Turner 2018, Agostinelli and Sorrenti 2018).
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