Grandchild care and grandparents’ labor supply

Abstract

Grandchild care is becoming an increasingly important part of raising children as the population ages and the cost of parenting increases. However, the labor supply effect of grandchild care on grandparents remains understudied. This study aims to identify the causal impact of grandchild care on grandparents’ labor supply in China. The main estimates demonstrate that providing grandchild care would significantly and intensively crowd out grandparents’ labor supply, particularly for grandmothers. Further heterogeneity analyses suggest that the negative labor supply effect varies by employment status and sector, regional characteristics, and grandparents’ demographic features. The paper also demonstrates that the negative labor supply effect operates via two pathways: reduced old-age income and increased adult children’s income, with the latter dominating the former. Moreover, the findings show that increased grandchild care is associated with a lower incidence of financial transfers from parents to grandparents.