Early child development and parents' labor supply

The impact of children's early development status on parental labor market outcomes is not well established in the empirical literature. We combine an instrumental variable approach to account for the endogeneity of the development status with a model of nonrandom labor force participation to identify its impact. A one-unit increase in our poor child development index reduces long-term maternal weekly hours worked by 9 h and weekly income by A$215. We provide evidence that mothers substitute working time with childcare to compensate for early disadvantages. We do not find any responses of fathers to early child development.