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

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  • Olena Nizalova

    () (Kyiv School of Economics, Kyiv Economic Institute)

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 di ers 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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File URL: http://repec.kse.org.ua/pdf/KSE_dp32.pdf
File Function: Revised version, December 2011
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Bibliographic Info

Paper provided by Kyiv School of Economics in its series Discussion Papers with number 32.

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Date of creation: Jul 2010
Date of revision: Nov 2011
Handle: RePEc:kse:dpaper:32

Note: Forthcoming in Southern Economic Journal
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Keywords: Wage Elasticity; Informal Care Supply; Labor Supply; Elderly Care; Family Obligations;

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  1. Casey B. Mulligan, . "The Intertemporal Substitution of Work--What Does the Evidence Say?," University of Chicago - Population Research Center 95-11, Chicago - Population Research Center.
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  3. Sloan, Frank & Gabriel Picone & Thomas J. Hoerger, 1995. "The Supply of Children's Time to Disabled Elderly Parents," Working Papers 95-46, Duke University, Department of Economics.
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  7. Schokkaert, Erik, 2006. "The Empirical Analysis of Transfer Motives," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  8. Sloan, Frank & Harold H. Zhang, 1995. "Upstream Intergenerational Transfers," Working Papers 95-15, Duke University, Department of Economics.
  9. 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, vol. 55(4), pages 765-99, July.
  10. Pencavel, John, 1987. "Labor supply of men: A survey," Handbook of Labor Economics, in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 1, pages 3-102 Elsevier.
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  13. Van Houtven, Courtney Harold & Norton, Edward C., 2004. "Informal care and health care use of older adults," Journal of Health Economics, Elsevier, vol. 23(6), pages 1159-1180, November.
  14. Julie Zissimopoulos, 2001. "Resource Transfers to the Elderly: Do Adult Children Substitute Financial Transfers for Time Transfers?," Working Papers 01-05, RAND Corporation Publications Department.
  15. Meta Brown, 2006. "Informal Care and the Division of End-of-Life Transfers," Journal of Human Resources, University of Wisconsin Press, vol. 41(1).
  16. Steven J. Haider & David S. Loughran, 2008. "The Effect of the Social Security Earnings Test on Male Labor Supply: New Evidence from Survey and Administrative Data," Journal of Human Resources, University of Wisconsin Press, vol. 43(1).
  17. Courtney C. Coile, 2004. "Health Shocks and Couples' Labor Supply Decisions," NBER Working Papers 10810, National Bureau of Economic Research, Inc.
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