Abstract

This paper considers household decision making on living arrangements and maternal labor supply in an extended family with young children. In such a context, the decision making is driven by the concern that the companionship of children is a household public good and that family members share childcare and related domestic duties. The incentive to share children’s companionship is affected by son preference, whereas the economic motive of labor division hinges on the potential wage rate of the mother. Both channels play important roles in households with mothers whose wage rates are high,  while sharing the companionship of (grand)sons is the main driving force in households with mothers whose wage rates are low. Using China Health and Nutrition Survey (CHNS) data, we find that among less-educated mothers, the incidence of a family co-residing with the paternal grandmother is at least 8.6 percentage points higher if the firstborn is a boy. At the same time, maternal labor supply increases by 2.9 days per month. By contrast, for educated mothers, the propensity for co-residence is higher, and the working hours are longer than for less-educated mothers, and the impact of the child’s sex is not significant. This paper not only provides a better understanding of the demographic and economic factors determining co-residence and intra-household time allocations, but also lends empirical support to policies aiming to increase female labor supply and improve the well-being of girls.