Child Support, Consumption, and Labor Supply Decisions of Single-Mother Families

This study estimates the causal effect of child support on consumption and labor supply of single mother families. Using data from the 1999 to 2013 waves of the Panel Study of Income Dynamics and the instrumental variable estimations that control for individual fixed effects, we do not find convincing evidence of significant influence of child support on consumption of custodial mother families. At the same time, we document a statistically significant and quantitatively important negative effect of child support on mothers’ probability of working and the amount of labor supplied. We also find the negative effect of child support on earnings conditional on positive labor income. We conclude that single mothers, especially those with weak attachment to labor force, might value time out of work, perhaps additional time spent with their children, more than the marginal gains in consumption.