How Grandparents' Coresidence Affects the Relationship Between Fertility and Parental Labor Market Choices: Evidence From China

Abstract

The issue of motherhood penalty, i.e., the number of children in a household negatively affects the mother's LFP but has no impact on the father's LFP, has been widely discussed in previous literature. However, most literature mainly discusses the motherhood penalty among nuclear families or only focuses on labor supply and ignores the situation in which parents may respond to the increase in family size by switching jobs instead of leaving the workforce. In this paper, we study the impact of family size on not only parents' labor supply but also parents' occupational prestige scores (OPSs) in China. To address the potential endogeneity of family size, we adopt the indicator of twins at first birth as an instrumental variable. Using the 1990 Chinese Population Census, we find a significant LFP penalty for mothers in households with either rural or urban hukou. In addition, we find that the coresidence of grandparents in rural families allows mothers to do a job with a higher OPS, while the coresidence of grandparents in either rural or urban families augments fathers' probability of working. These improvements in mothers' OPSs and fathers' labor supply are mainly driven by the coresidence of grandmothers. Our results also indicate that with the economic and social development in China from 1990 to 2000 the child penalty on the female labor supply is replaced by a child penalty on female OPSs, but the benefit of living with grandmothers remains in households with urban hukou.

Keywords: Family size, Occupational prestige, Household structure

JEL Classification: J12, J13, D10