Child-care costs and mothers’ employment rates: an empirical analysis for Austria

The availability of affordable formal child care is an important determinant of the labour force participation of parents, particularly of mothers, which is increasingly discussed. This paper examines the impact of child-care costs on the employment rates of mothers with children younger than 12 years. Using data from the 1995 and 2002 Austrian Microcensus, combined with administrative wage data from Austrian tax records, we estimate the impact of net wages and child-care costs on mothers’ employment probabilities. In line with theoretical considerations and most of the empirical literature, we find a negative elasticity of mothers’ employment rates to child-care costs as well as positive elasticity with regard to net wages. The point estimates for the impact of net wages and child-care costs are of similar absolute size. Additionally, the empirical results indicate that higher family income reduces the employment probability of mothers.