Grandmothers' Labour Supply

The birth of a child may have (negative) consequences on labour supply of the mother or the parents in general – but also on labour supply of the grandmother. Non-availability of formal child-care may force the extended family to bargain whether the mother, the father or the grandmother is taking a leave to care for the child. While the joint determination of mother's labour supply and fertility decisions is well studied in the literature, a thorough causal analysis of labour supply effects of becoming a grandmother is practically non-existent. We will use administrative data covering the universe of Austrian workers and two different identification strategies to explore causal effects of having a first grandchild versus having an additional one. We find that becoming a grandmother significantly increases the probability of labour market exit. Similarly, having an additional grandchild reduces labour market participation. Such an analysis is important, because it investigates side-effects of the existence of formal child-care facilities on labour supply and early retirement behaviour of elderly workers in times of serious demographic pressure on public pensions systems.