With strings attached: Grandparent-provided child care, fertility, and female labor market outcomes

Grandparents are regular providers of free child care. Similar to any other form of child care, availability of grandparent-provided child care affects fertility and labor market decisions of women positively. We find that women in Germany, residing close to parents or in-laws are more likely to have children and that as mothers they are more likely to hold a regular part-or fulltime job. However, different from any other type of child care, for individuals to enjoy grandparent-provided child care on a regular basis, residence choices must coincide with those of parents or in-laws. Thus while living close provides access to free child care, it imposes costly spatial restrictions. We find that hourly wages of mothers residing close to parents or in-laws are lower compared to those residing further away, and having relatives taking care of ones' children increases the probability of having to commute. We build a general equilibrium model of residence choice, fertility decisions, and female labor force participation that can account for the relationships between grandparent-provided child care, fertility and labor market outcomes. We simulate our model to analyze how women's decisions regarding residence, fertility, and labor force participation change under different family policies.