DP12487 Grandmothers' Labor Supply

Author(s): Wolfgang Frimmel, Martin Halla, Bernhard Schmidpeter, Rudolf Winter-Ebmer
Publication Date: December 2017
Keyword(s): Female labor supply, grandchildren, instrumental variables, timing of events
JEL(s): J13, J14, J22
Programme Areas: Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=12487

The labor supply effects of becoming a grandmother are not well established in the empirical literature. We estimate the effect of becoming a grandmother on the labor supply decision of older workers. Under the assumption that grandmothers cannot predict the exact date of conception of their grandchild, we identify the effect of the first grandchild on employment (extensive margin). Our Timing-of-Events approach shows that having a first grandchild increases the probability of leaving prematurely the labor market. This effect is stronger when informal childcare is more valuable to the mother. To estimate the effect of an additional grandchild (intensive margin), we assume that the incidence of a twin birth among the third generation is not correlated with unobserved determinants of the grandmother's labor supply (first generation). Our respective 2SLS estimation shows a significant effect of further grandchildren. Our results highlight the important influence of the extended family on the decisions of older workers and point to mediating effects of different institutional settings.