Previous research on the economic determinants of the demand for child care recognized the role of the opportunity cost of the mother's time in influencing the choice of the mode of care. However, by focusing exclusively on the choice of child care mode, this work ignored the fact that child care, like female labor supply, has an hours dimension. Hours of purchased child care and hours of work are likely to be jointly determined along with the time spent by the mother in the care of children. The goal of our proposed new research is to develop and estimate a short-run microeconomic model of the demand for child care services and the supply of labor for married women with young children. A primary objective of the analysis is to develop theoretical and empirical relationships for hours of market work, hours of purchased child care, and the allocation of mother's time to the care of her own children. To account for the possibility that hours of work and/or hours of child care are equal to zero, we will construct an empirical framework based on recent research into the implications of quantity constraints in demand analysis. This will allow us to exploit the formal equivalence which exists between conditional demand functions that arise in the case of corner solutions and those which are the result of rationing to make inferences about the impact of the unavailability of child care services on the supply of labor for married women. We propose to use data on both working and nonemployed women from the 1976 wives interview of the Panel Study of Income Dynamics. Estimation of the structural model will be achieved by the method of maximum likelihood.
