The allocation of children’s time among different activities may be important for cognitive and noncognitive development. Here, we exploit time use diaries from the Longitudinal Study of Australian Children to study the effects of time allocation. By doing so, we characterize the trade-off between different activities to which a child is exposed. On the one hand, our results suggest that time spent in educational activities, particularly with parents, is the most productive input for cognitive skill development. On the other hand, noncognitive skills appear insensitive to alternative time allocations. Instead, they are greatly affected by the mother’s parenting style.

In this article, we provide quantitative evidence on the effects of monetary incentive schemes designed to reduce racial differences in school attainment and earnings. Our analysis is based on the structural estimation of a dynamic model of schooling, work, and occupational choice decisions over the life cycle. We consider two recent proposals that, although not specifically targeted to blacks, can be expected to have differential racial impacts. One proposal, suggested by Robert Reich, provides a high school graduation bonus to youths from lower‐income families. The other, suggested by Edmund Phelps, provides wage subsidies to low‐wage workers.

Many studies estimate the Frisch elasticity via two-stage least squares (2SLS) regression of hours changes on wage changes. However, 2SLS suffers from a power asymmetry problem that makes estimates far away from ordinary least squares appear spuriously imprecise. Hence, it is difficult for t-tests to detect a positive Frisch elasticity. We illustrate the problem using NLSY97 data. We estimate an elasticity of 0.60 for young men, but the t-test indicates that it is insignificant. The Anderson-Rubin (AR) test, which avoids the power asymmetry problem, indicates that it is highly significant. We argue that the AR test should be widely adopted in lieu of the t-test in instrumental variable applications.

We develop an equilibrium model of the US labor market, fit to Panel Study of Income Dynamics data from 1968–96. Our main innovation is a finer differentiation of types of labor than in prior work (i.e., by occupation, education, gender, and age). This lets us fit wage and employment patterns better than simpler models. We obtain a good fit to wages and occupational choices over the 29-year period while also explaining college attendance rates. We use the model to assess factors driving changes in the wage structure. Occupational demand shifts and shifts in demand for college labor and female labor within occupations are key factors.

We evaluate the effect of child care versus maternal time inputs on child cognitive development using single mothers from the NLSY79. To deal with nonrandom selection of children into child care, we exploit the exogenous variation in welfare policy rules facing single mothers. In particular, the 1996 welfare reform and earlier state-level policy changes generated substantial increases in their work/child care use. We construct a comprehensive set of welfare policy variables and use them as instruments to estimate child cognitive ability production functions. In our baseline specification, we estimate that a year of child care reduces child test scores by 2.1%.