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Partnered Women's Labour Supply and Child-Care Costs in Australia: Measurement Error and the Child-Care Price


  • Robert Breunig would like to thank the Australian Treasury for their support and hospitality. This paper has benefited from comments and suggestions provided by two anonymous referees, Mark Bott, Guyonne Kalb, Laura Llewellyn, Maryanne Mrakovcic, Leo Vance and Stephen Whelan and from comments from seminar participants at La Trobe University, Paris I Sorbonne, the OECD, the Australian Labour Econometrics Workshop 2010 at Deakin University, the Australian Conference of Economists 2011 and the Australian National University. This paper uses in-confidence unit record data from the Household, Income and Labour Dynamics in Australia (HILDA) survey. The HILDA project was initiated and is funded by the Commonwealth Department of Families, Housing, Community Services and Indigenous Affairs (FaHCSIA) and managed by the Melbourne Institute of Applied Economic and Social Research (MIAESR). The findings and views reported in this paper, however, are those of the authors and the views should not be attributed to FaHCSIA, MIAESR or the Australian Treasury.

Xiaodong Gong, NATSEM, University of Canberra, Canberra, ACT, Australia. Email:


We show that measurement error in the constructed price of child-care can explain why previous Australian studies have found partnered women's labour supply to be unresponsive to child-care prices. Through improved data and improved construction of the child-care price variable, we find child-care price elasticities that are statistically significant, negative and in line with elasticities found in other developed countries.