Outsourcing household production: Foreign domestic workers and native labor supply in Hong Kong

Abstract

We explore how the availability of affordable live-in help provided by foreign domestic workers {eth}FDWs{Thorn} in Hong Kong affected native women's labor supply and welfare. First, we exploit differences in the FDW program between Hong Kong and Taiwan. Second, we use cross-sectional variation in the cost of a FDW to estimate a model of labor force participation and FDW hire. FDWs increased the participation of mothers with a young child {eth}relative to older children{Thorn} by 10-14 percentage points and have generated a monthly consumer surplus of US$130-US$200. By reducing child care costs through immigration, this is a market-based alternative to child care subsidies. © 2013 by The University of Chicago. All rights reserved.