Family Bargaining and the Gender Gap in Informal Care

We study the optimal long‐term care (LTC) policy when informal care can be provided by children in exchange for monetary transfers from their elderly parents. We consider a bargaining model with single‐child families, where daughters have lower labor market wages, and bargaining power within the family varies by the child's gender. In the laissez‐faire scenario, daughters always provide more informal care than sons. When their bargaining weight is smaller, they also experience lower welfare; however, this may be reversed if their bargaining weight is sufficiently high. The first‐best outcome involves redistribution from families with sons to families with daughters and can be implemented through a gender‐specific schedule of public LTC benefits and state‐contingent transfers to adult children. Gender neutrality disadvantages families with daughters and may even leave daughters worse off than under laissez faire. It also leads to a distorted allocation of care within families with daughters and affects the distribution of transfers in all families.