Intergenerational time transfers and childcare

Abstract

Although intergenerational transfers of time in the form of grandparenting are substantial, little is known about their role and importance. In this paper, we calibrate an overlapping generations model extended to allow for both time and monetary transfers to the US economy. We use simulations to show that time transfers have important positive effects on labor supply and capital accumulation. We also find that subsidizing the time of the retired spent grandparenting is the most effective child care policy when time transfers are allowed, while subsidizing child care expenses is the most effective when time transfers are not. They both lead to higher levels of child care with positive effects on output and capital accumulation.