Women’s decisions on labor and care-work arrangement in Mexico

Abstract

This paper develops a discrete choice model to analyze the labor and childcare decisions of Mexican women with children under five years of age. A mixed logit model is used to simulate the potential effects of public policies on these decisions. Data from the National Survey on Time Use shows that disposable income, leisure, and the number of childcare options can explain women's labor and care decisions. In addition, it shows that the presence of children under two years old in the home decreases a woman's probability of entering the labor market. Alternatively, the presence of children between three and five years old or grandparents who are able to provide care increases it. Policy simulations suggest that the most effective policy to increase women's participation in the labor market is a reduction of the marginal rate of the personal income tax for women working in the formal sector who have children under five years old, compared to other options such as tax credits and conditional cash transfers for women in the formal sector. The simulated policies have limitations since the poorest women are employed in the informal sector.