Working Paper: CEPR ID: DP12487
Authors: Wolfgang Frimmel; Martin Halla; Bernhard Schmidpeter; Rudolf Winterebmer
Abstract: 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.
Keywords: grandchildren; female labor supply; timing of events; instrumental variables
JEL Codes: J13; J14; J22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Informal childcare needs (J13) | Likelihood of grandmother leaving labor market (J26) |
| Grandmothers timing their exit from labor market (J26) | Informal childcare needs (J13) |
| Birth of first grandchild (J19) | Likelihood of grandmother leaving labor market (J26) |
| Arrival of additional grandchildren (J19) | Expected duration in labor market (J29) |