The Determinants and Consequences of Child Care Subsidies for Single Mothers in the USA

This paper provides an analysis of child care subsidies under welfare reform in the USA. We used data from the 1999 National Survey of America's Families to analyze the determinants of receipt of a child care subsidy and the effects of subsidy receipt on employment, school attendance, unemployment, and welfare participation. Ordinary least-squares estimates that treat subsidy receipt as exogenous show an effect of subsidy receipt on employment of about 13 percentage points. Two-stage least-squares estimates that treat subsidy receipt as endogenous and use county dummies as identifying instruments show an effect of 33 percentage points on employment, 20 percentage points on unemployment, and no effects on schooling and welfare receipt.