We study the effect of family income and maternal hours worked on child develop-
ment. Our instrumental variable analysis suggests different results for cognitive and
behavioral development. An additional $1,000 in family income improves cognitive
development by 4.4 percent of a standard deviation but has no effect on behavioral
development. A yearly increase of 100 work hours negatively affects both outcomes
by approximately 6 percent of a standard deviation. The quality of parental invest-
ment matters and the substitution effect (less parental time) dominates the income
effect (higher earnings) when the after-tax hourly wage is below $13.50. Results call
for consideration of child care and minimum wage policies that foster both maternal
employment and child development.




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