Meifeng Yang

WORKING PAPERS

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

[Draft] [Online Appendix]

Abstract: In the United States, many older women reduce work when a first grandchild is born. The observed phenomenon is called "grandchild penalty."  This paper examines how grandchild care provision shapes grandmothers’ labor supply. Using data from the Health and Retirement Study (HRS), I find that employment falls by 13 percent and earnings by 25 percent following the birth of a first grandchild. These effects operate mainly through the channel of grandchild care provision. To disentangle whether care provision reflects intrinsic preference or a response to parental childcare needs, I exploit the introduction of California’s Paid Family Leave (CA-PFL) policy, which expanded paid leave for parents with newborns and reduces their reliance on grandparents for childcare. A difference-in-differences design shows that CA-PFL increased grandmothers’ employment by 7 percentage points and lowered their caregiving by 9 percentage points. To interpret these findings, I develop a dynamic life-cycle model that quantifies how grandmothers balance work and caregiving when facing competing incentives from family childcare needs and their own economic security. Counterfactual analysis shows that CA-PFL raises lifetime consumption by 1.4 percent, driven mainly by higher labor market earnings, followed by an increase in Social Security and pension benefits.