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Working Mums and Informal Care Givers: The Anticipation Effect

Abstract

Fertility and the provision of long-term care are connected by an aspect that has not received attention so far: both are time consuming activities that can be produced within the household or bought at the market and are, thus, connected through the intertemporal budget constraint of the household that accounts for time and money. This paper models that link and analyzes the effect of intervention in the long-term-care market on female labor-market related decisions. It shows that women’s fertility and their labor supply when young are affected by such policies. The overall effect can be decomposed into an opportunity-cost effect and a consumption-smoothing effect that each impact fertility as well as labor supply in opposite directions. Using survey data, the paper provides some evidence that in the member states of the European Union the consumption-smoothing effect is dominant.