We investigate the effect of immigration on the labor supply of skilled native women. We present a simple time-use model that predicts that a reduction in the price of household services (such as cooking or cleaning) should lead to a reduction in the labor-supply gap between women with and without family responsibilities (such as caring for children or elderly). We test this prediction using data on Spain’s large recent immigration wave. Methodologically we adopt a spatial correlations approach and instrument for current immigration using pre-existing ethnic networks. Importantly, our data allows us to measure accurately the number of immigrants, including those that are undocumented. First, we show that recent female immigration into a region increases the local availability of household services in that region and reduces their price. Second, our IV estimates suggest that immigration may have accounted for one third of the large increase in the employment rates of college-educated women with family responsibilities. In particular, it allowed them to return to work earlier after childbirth, to continue working while caring for male elderly dependents, and to postpone their own retirement when their husbands retire. Third, we also make a methodological contribution with important policy implications. We show that just a limited amount of registry data is necessary in order to conduct the analysis using annual data, as opposed to having to rely on the decennial Census. Overall, our results suggest that special visa programs targeted to household service workers can be highly effective in helping skilled women cope with child and elderly care. The latter seems particularly relevant in Europe, given the currently ongoing aging of the population.

Keywords: Immigration, Labor supply, Fertility, Retirement, Household services
JEL: J61, J22, J13