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The effect of grandchildren on grandparental labor supply: Evidence from Europe

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  • Backhaus, Andreas
  • Barslund, Mikkel

Abstract

Grandparents at working age frequently take care of their grandchildren. These time transfers may constrain the formal labor supply of grandparents. 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 employment rate of women aged 55 to 64. The effect is particularly pronounced in countries where the availability of formal childcare is low. A complier characterization reveals that the large LATE applies to a small but not selected group of potential grandmothers and may explain a substantial share of the gender gap in employment at later working age. Male labor supply does not significantly adjust in response to grandparenthood. We further find that grandmothers are more likely to transfer gifts to their children than women who are not grandmothers, whereby grandmothers substitute between time and gift transfers.

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  • Backhaus, Andreas & Barslund, Mikkel, 2021. "The effect of grandchildren on grandparental labor supply: Evidence from Europe," European Economic Review, Elsevier, vol. 137(C).
    • Handle: RePEc:eee:eecrev:v:137:y:2021:i:c:s0014292121001598
    DOI: 10.1016/j.euroecorev.2021.103817
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    Keywords

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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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