Women's labor force participation rate has increased sharply over the last two decades.
The increase has been particularly dramatic for married women with young children suggesting
that women are spending less time out of the labor force for child-bearing and rearing. Using the
relatively detailed information available in the National Longitudinal Survey of Youth, this paper
explores women's decisions to return to work within one year of the birth of their ﬁrst child,
focusing particularly on the effect of child care costs. By constructing two indices of child care
cost across states, I am able to utilize instrumental variables estimation to reduce the effect of
measurement error on the estimated inﬂuence of child care cost. Consistent with economic
theory, women who face lower child care costs are more likely to return to work after giving birth
as are women with higher potential wages and lower family income from other sources.