The Effect of Grandchildren on Grandparental Labor Supply: Evidence from Europe

Category: Money and Macro Brown Bag Seminar
When: 26 November 2020
, 12:00
 - 13:00
Where: online
Speaker: Andreas Backhaus (Bundesinstitut für Bevölkerungsforschung)

Grandparents at working age frequently take care of their grandchildren. These time transfers may constrain the participation of grandparents in the labor market. Using an instrumental variable strategy and multiple waves of the Survey of Health, Ageing and Retirement in Europe (SHARE), we estimate the causal effect of grandparenthood on the labor supply of working-age grandparents in ten European countries. We find a large negative impact of grandparenthood on the labor supply of women aged 55 to 64. The effect operates at the extensive margin of labor supply, resulting in grandmothers leaving the labor market entirely. Furthermore, the effect is particularly pronounced in countries where the availability of childcare outside the family is low. A complier characterization reveals that the large LATE applies to a small but not selected group of grandmothers. Male labor supply does not significantly adjust in response to grandparenthood. Our results imply a relevant trade-off between labor supply and grandchild care for European women.