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In this study, we consider household decision-making on living arrangements and maternal labor supply in extended families with young children. In such a context, decision-making is driven by the concerns 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 coresiding 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 coresidence is higher, the working hours are longer, and the impact of the child's sex is not significant. Our study not only provides a better understanding of the demographic and economic factors determining coresidence and intrahousehold time allocations but also lends empirical support to policies aiming to increase female labor supply and improve the well-being of girls.
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