Spillover Effects of Old-Age Pension Across Generations: Family Labor Supply and Child Outcomes

Abstract

We study the impact of grandparental retirement decisions on family members’ labor supply and child outcomes by exploiting a Dutch pension reform in a fuzzy Regression Discontinuity design. A one-hour increase in grandmothers’ hours worked causes adult daughters with young children to work half an hour less. Daughters without children, with older children and sons/daughters-in-law are not affected. We show important long-run impacts on maternal labor supply and on the child penalty. Test score effects are positive for children aged 4-7 (substitution from grandparental to maternal care), and negative for children aged 11-12 (substitution from grandparental to formal childcare).

Keywords: spillover effects, retirement, grandparental childcare, maternal labor supply, child development

JEL Classification: J130, J220, J260, I380, D640