Intergenerational Contracts and Female Labor Supply

This article examines the effects of intergenerational relationships on supply of female labor across the life cycle. I begin by developing a non-altruistic dynamic contract model, which uses economic benefits to sustain such relationships in the face of long-term incentive problems. I then estimate the parameters of the model using Chinese household survey data. Based on the model, I quantify the effects of the relationships on household economic behaviors. I find that intergenerational relationships increase the labor supply of young females by 32% and increase old households' savings by 13%. My policy experiments check the spillover effects of intergenerational relationships on policy outcomes. I find that delaying the retirement age reduces the labor supply of young females and that raising inheritance taxes increases the savings of older households. The results indicate that intergenerational relationships have significant effects on households' economic decisions and important implications for public policy.