Abstract
The economic role of elderly people is underestimated in the context of the debate on pension reforms. This is because, as healthy life expectancy increases, the elderly become more active not only in the labor market but also in household production. Using a three-period overlapping-generations model in which grandparents allocate time between labor and informal childcare (“grandparenting”), we analyze the interaction among grandparenting, fertility, elderly labor, and public pensions. We obtain two analytical results. First, increasing the pension contribution rate increases grandparenting. Second, elderly labor force participation rates are negatively (positively) related to the fertility rates among countries with small (large) public pensions. The nonlinear relationship between elderly labor and fertility is empirically supported.
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