The effects of immigration on household services, labour supply and fertility

Fertility and female labour force participation are no longer negatively correlated in developed countries. Recently, the role of immigration has been put forward as a driving factor among others. Increased immigration affects supply and prices of household services, which are relevant for fertility and employment decisions. This paper analyses the effect of immigration on labour supply and fertility of native women in the UK, with a focus on the role of immigration on household services. Adopting an instrumental variable approach based on the country-specific past distribution of immigrants at regional level, I find that immigration increases female labour supply, without affecting fertility. My results show that immigration increases the size of the childcare sector, and reduces its prices, suggesting that immigrants may ease the trade-off between working and child rearing among native women.