Family Labor Participation and Child Care Decisions The Role of Grannies

One of the most significant long term trends in the labor market in most OECD countries has been the increase in the proportion of working mothers. However, not all countries show the same pattern. Countries in Southern Europe (Italy, Greece and Spain) show an average participation rate of about 45% whereas the participation rates in Northern countries (Denmark, Sweden) are around 75%. The characteristics of child care systems also differ significantly across OECD countries. This along with the characteristics of the labor market may have led families to get the necessary social services in an alternative way, i.e. through grandmothers. This paper analyzes how and to what extent child care is provided by grandmothers and how this task is combined with paid work in 10 European countries. Moreover, it studies whether the child care provided by grandmothers is encouraging the labor participation of their sons and, especially, their daughters. For this aim, it uses a sample drawn from the Survey of Health, Aging and Retirement in Europe (SHARE) which provides detailed information about grandmothers (the units of observation) as well as their offspring with children. The econometric model considered takes into account the simultaneity of labor market decisions and care-giving activities, while controlling for unobserved heterogeneity in care-giving decisions. Here it exploits the fact that, information about multiple offsprings with children is usually available for each grandmother. It finds a negative and very significant effect of participating in the labor market on the probability of taking care of the grandchildren on a regular basis. It also finds evidence that, for some countries, the child care provided by grandmothers has a positive effect on the labor participation of their daughters.