Grandparental Childcare and Second Birth in China: Evidence from a Dynamic Model and Empirical Study

The availability of nonparental childcare may be an important factor that influences reproductive decisions. While there is still a shortage of formal childcare service in China, grandparents are one primary source of childcare for their grandchildren. However, impact evaluations regarding the contribution of grandparenting on fertility level in China are still limited; the established evaluation results are not conclusive, especially for the birth of the second child. In this paper, we provide a theoretical justification and an empirical study of the influence of grandparental childcare on the second birth. By introducing a dynamic general equilibrium (DGE) model, this study proves that intergenerational childcare plays a critical role in both boosting the fertility level and maintaining its positive tendency. Drawing on the nationally representative data from the China Migrants Dynamic Survey in 2016, we estimate the treatment effects of grandparental childcare for the first child on the second birth with the Propensity Score Matching method. After controlling the self-selection bias, the results show that intergenerational childcare can positively affect the second birth. Sensitivity analysis results show the relative robustness of our empirical estimates to potential hidden bias attributed to unobserved variables. We also draw policy implications from the analysis, calling for government policies not only to promote sustainable and healthy development of the childcare industry but also to support family life, especially grandparental childcare.