The Family Peer Effect on Mothers' Labour Supply
Social Science Research Network
Structured Abstract Purpose We estimate the parental investment response to the child endowment at birth, by analysing the e¤ect of child birth weight on the hours worked by the mother two years after birth. Mothers' working hours soon after childbirth are a measure of investments in their children as a decrease (increase) in hours raises (lowers) her time investment in the child. Methodology/approach The child birth endowment is endogenously determined in part by unobserved traits of parents,
... traits of parents, such as investments during pregnancy. We adopt an instrumental variables estimation. Our instrumental variables are measures of the father's health endowment at birth, which drive child birth weight through genetic transmission but does not a¤ect directly the mothers' postnatal investments, conditional on maternal and paternal human capital and prenatal investments. Findings We ...nd an inverted U-shape relationship between mother's worked hours and birth weight, suggesting that both low and extremely high child birth weight are associated with child health issues for which mothers compensate by reducing their labour supply. The mother's compensating response to child birth weight seems slightly attenuated for second and later born children. Originality/value of paper Our study contributes to the literature on the response of parental investments to child's health at birth by proposing new and more credible instrumental variables for the child health endowment at birth and allowing for a heterogenous response of the mother's investment for ...rst born and later born children.