Family Trajectories and the Burden of Care in the Aftermath of Old-Age Health Shocks

Elderly care needs are increasing in many rich and aging countries, yet the costs that they impose on families remain poorly understood. The economics literature has focused on how caregiving causes families to substitute from work toward informal care provision. But many families cannot afford to work less when care needs arise, so the costs of care may surface elsewhere. Consistent with this, we show that sudden declines in the health of elderly Taiwanese adults disrupt the life cycles of their adult sons: sons die at higher rates, exhibit worse health, and marry and have children at lower rates. Effects are largest in families least able to absorb care needs, which points to the burden of care as a key mechanism. Using reforms that expanded eligibility to hire migrant caregivers, we find evidence that live-in caregiver hiring can attenuate mortality and employment effects. Taking our quasi-experimental evidence to a flexible life cycle framework suggests that the welfare gains to adult sons from caregiver hiring can be large, driven mainly by improved survival.