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The Wage Elasticity of Informal Care Supply: Evidence from the Health and Retirement Study

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  • Nizalova, Olena Y.

    ()
    (University of Kent)

Abstract

This paper focuses on the relationship between wages and supply of informal care to elderly parents. Unlike most of the previous research estimating wage elasticities of informal care supply, this study employs instrumental variable technique to account for the fact that the wage rate is likely to be correlated with omitted variables. Based on the data from the 1998 wave of the Health and Retirement Study, the results show that the wage elasticity of informal care supply is negative and larger in magnitude than has been found previously. The lower bound of this elasticity is estimated to be -1.8 for males and -3.6 for females. Additional findings suggest that the wage elasticity of informal care supply differs by the type of care provided to elderly parents, and that it is larger in magnitude among individuals with siblings and those with independently living parents. The analysis also indicates that the reductions in the informal care constitute about 18% of the labor supply response for men and about 56% of the labor supply response for women, which are not compensated by monetary transfers.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5192.

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Length: 34 pages
Date of creation: Sep 2010
Date of revision:
Publication status: published in: Southern Economics Journal, 2012, 79 (2), 350-366.
Handle: RePEc:iza:izadps:dp5192

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Keywords: labor supply; family obligations; wage elasticity; informal care supply; elderly care;

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  1. Casey B. Mulligan, . "The Intertemporal Substitution of Work--What Does the Evidence Say?," University of Chicago - Population Research Center, Chicago - Population Research Center 95-11, Chicago - Population Research Center.
  2. Mroz, Thomas A, 1987. "The Sensitivity of an Empirical Model of Married Women's Hours of Work to Economic and Statistical Assumptions," Econometrica, Econometric Society, Econometric Society, vol. 55(4), pages 765-99, July.
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  6. Yannis M. Ioannides & Kambon Kan, 1999. "The Nature of Two-Directional Intergenerational Transfers of Money and Time: An Empirical Analysis," Discussion Papers Series, Department of Economics, Tufts University, Department of Economics, Tufts University 9917, Department of Economics, Tufts University.
  7. Baker, Michael & Benjamin, Dwayne, 1999. "How do retirement tests affect the labour supply of older men?," Journal of Public Economics, Elsevier, Elsevier, vol. 71(1), pages 27-51, January.
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  9. Kenneth Couch & Mary Daly & Douglas Wolf, 1999. "Time? money? both? the allocation of resources to older Parents," Demography, Springer, Springer, vol. 36(2), pages 219-232, May.
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  12. Van Houtven, Courtney Harold & Norton, Edward C., 2004. "Informal care and health care use of older adults," Journal of Health Economics, Elsevier, Elsevier, vol. 23(6), pages 1159-1180, November.
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  14. Sloan, Frank & Gabriel Picone & Thomas J. Hoerger, 1995. "The Supply of Children's Time to Disabled Elderly Parents," Working Papers, Duke University, Department of Economics 95-46, Duke University, Department of Economics.
  15. Julie Zissimopoulos, 2001. "Resource Transfers to the Elderly: Do Adult Children Substitute Financial Transfers for Time Transfers?," Working Papers, RAND Corporation Publications Department 01-05, RAND Corporation Publications Department.
  16. Leora Friedberg, 1999. "The Labor Supply Effects of the Social Security Earnings Test," NBER Working Papers 7200, National Bureau of Economic Research, Inc.
  17. John Pencavel, 2002. "A Cohort Analysis of the Association between Work Hours and Wages among Men," Journal of Human Resources, University of Wisconsin Press, vol. 37(2), pages 251-274.
  18. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
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