The Effect of Grandparental Support on Mothers’ Labour Market Participation: An Instrumental Variable Approach

Abstract

Mothers' Labour Market Participation: Do Grandparents Make It Easier?Childcare arrangements are key in women's ability to juggle motherhood and working outside the home. As such, the study of the access to childcare and its use is of great policy relevance. We focus on a particular kind of informal childcare, the one provided by grandparents. Empirically, assessing the effect of grandparental childcare is not an easy task due to unobserved preferences. In light of the potential outcome framework, we interpret the biases resulting from unobserved preferences as arising from the non-compliance of mothers to the availability of grandparents and from preferences of grandparents for activities other than childcare. Using an Instrumental Variable approach on Italian data, we find that the effect of grandparental childcare on mothers' labour supply is positive, statistically significant and economically relevant. The effect is stronger for lower educated mothers, with young children and living in the North and Centre.JEL Classification: J10, J13, C26

Grandparental availability for child care and maternal labor force participation: pension reform evidence from Italy

“…3 In earlier work, Posadas and Vidal-Fernandez (2013) apply a similar identification strategy to US panel data to demonstrate a positive effect on women's LFP. Their instrumental variable (IV) estimates, however, are much lower (14.6 percentage points) and less precise (p value = 0.29) than those reported by Arpino et al (2014) for Italy, partly perhaps because of the two countries' different institutional settings. 4 Neither of these studies, however, takes into account that surviving grandparents may greatly differ in the amount of time they can devote to childcare, an aspect acknowledged in two recent papers that exploit differences in grandparental labor market participation generated by changes in retirement eligibility rules.…”

“…If so, we would expect to find evidence that maternal grandparents (grandmothers) are more likely to provide childcare than paternal grandparents (grandmothers). Extant research supports this view: a greater investment in childcare by maternal grandmothers is a very robust pattern in the sociological, psychological, and evolutionary literature (Coall et al 2014), one recorded for several countries, including the UK, the USA, Australia, Italy, and Norway (see Whelan 2013;Arpino et al 2014).…”

“…One previously attempted solution to this identification issue leverages the arguably exogenous variation in grandparent-provided childcare generated by either the grandparents' being alive or their retirement eligibility. 2 For example, Arpino et al (2014) employ data from the 2003 wave of the ISTAT multipurpose "Family and Social Subjects Survey" (FSSS), which collects information on a mother's use of grandparental childcare. By instrumenting the latter with grandparents being alive or not, these authors estimate that using grandparent-provided childcare raises a mother's likelihood of being in the labor market by 32.3 percentage points.…”

“…This assumption may fail in our setting because the monetary transfers that a woman (or her partner) receives from her parents or in-laws-whose effect on her nonlabor income varies her LFP incentives-will likely depend on whether these relatives are alive (dead) or (non)employed. In the case of Posadas and Vidal-Fernandez (2013) and Arpino et al (2014), for instance, in order for the exclusion restriction to hold, women with deceased parents (in-laws) must have the same nonlabor income availability as those whose parents (in-laws) are still alive. In reality, however, such may not be the case.…”

Fertility decisions and alternative types of childcare

“…As seen in Figure 2, countries with a high percentage of grandparents helping in childcare are typically those with lower fertility rates ( Figure 2). Most studies that address this topic focus on the impact of grandparents' care on mothers' work decisions, and typically find a positive relationship [9]. On the other hand, only a few studies have considered the impact of grandparents' care on fertility behavior directly.…”