All in the family: Informal childcare and mothers' labour market participation

In the traditional models of female labour supply formal childcare is assumed to be provided by the market. This is not the case in most European countries. In this paper we estimate the causal effect of a particular kind of informal care, the one provided by grandparents, on mothers' work decisions in Italy. We deal with the endogeneity due to mothers' and grandparents' unobserved preferences by instrumenting grandparents' help. We find that having grandparents helping with childcare increases mothers' labour market participation. The effect is particularly strong for lower educated mothers of young children, in North and Centre Italy.