The Unintended Consequences of Informal Childcare Subsidies for Older Women’s Retirement Security

ABSTRACT

I estimate impacts of subsidizing informal childcare on the economic outcomes of grandmothers. Exploiting variation in the generosity of federally funded childcare subsidies, I find that large increases in predicted subsidies generate small increases in grandmother caregiving behavior, suggesting grandmothers’ care is inframarginal (although effects may be attenuated by measurement error in the subsidy proxy). Subsidies reduce grandmothers’ labor supply and earnings. While I find no short-term effects on health or wealth, subsidy-eligible grandmothers claim Social Security early and have higher social insurance take-up, highlighting significant public costs in terms of both up-front childcare payments and long-term spending on the elderly.