Meifeng Yang

WORKING PAPERS

When Grandmothers Step In: Grandchild Care and Labor Supply Dynamics (Job Market Paper)

Grandmothers' provision of informal childcare often creates a direct tension with their own labor supply and retirement security. This paper quantifies this trade-off and examines how it is mediated by policy. First, an event-study analysis using the Health and Retirement Study (HRS) documents the existence of grandchild penalty: the arrival of a first grandchild precipitates a decline in grandmothers' employment and earnings. To identify the role of childcare demand, I then exploit the California's Paid Family Leave (CA-PFL) program introduced in 2004 in a difference-in-differences framework. The policy increases grandmothers' labor supply while reducing their grandchild care provision. To unpack the mechanisms, I develop and estimate a life-cycle model of labor supply and caregiving. The estimates reveal a significant utility cost to unmet care demand, rationalizing the large labor supply responses observed in the data. Counterfactual analyses show that an increase in the Social Security retirement age, absent such family policies, would impose significant welfare costs on grandmothers.