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Effect of Informal Care on Work, Wages, and Wealth

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  • Courtney Harold Van Houtven
  • Norma B. Coe
  • Meghan Skira

Abstract

Cross-sectional evidence in the United States finds that informal caregivers have less attachment to the labor force, measured both by the number of hours worked and labor force participation. The causal mechanism is unclear: do children who work less become informal caregivers, or are children who become caregivers working less? Using longitudinal data from the Health and Retirement Study (HRS), this project identifies the relationship between informal care and labor force participation in the United States, both on the intensive and extensive margins, and whether there are wage penalties from informal care. We use our results to examine retirement wealth effects, in particular, changes in Social Security benefits. In our approach we carefully test for endogeneity; control for time invariant individual heterogeneity; and, lastly, explore the effects across key domains of behavior for men and women – stage and duration of care. We find that there are modest decreases – around 2 percentage points – in the likelihood of being in the labor force for caregivers. We find that female caregivers who have longer spells face significant but modest risks of not working, that the negative effect on work for male caregivers occurs right away, and that both male and female caregivers who have ended caregiving are not significantly more likely to work. In addition, wage penalties exist for female caregivers and wage premiums exist for male caregivers. There are minimal expected changes to caregivers’ future Social Security benefits. Finally, despite strong instruments, there is no evidence of endogeneity between informal care and work, suggesting that controlling for individual heterogeneity with fixed effects is a sufficient approach in longitudinal inquiries of informal care’s effect on work and wealth.

Suggested Citation

  • Courtney Harold Van Houtven & Norma B. Coe & Meghan Skira, 2010. "Effect of Informal Care on Work, Wages, and Wealth," Working Papers, Center for Retirement Research at Boston College wp2010-22, Center for Retirement Research, revised Dec 2010.
  • Handle: RePEc:crr:crrwps:wp2010-22
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    File URL: http://crr.bc.edu/working-papers/effect-of-informal-care-on-work-wages-and-wealth/
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    Cited by:

    1. Sugawara, Shinya & Nakamura, Jiro, 2014. "Can formal elderly care stimulate female labor supply? The Japanese experience," Journal of the Japanese and International Economies, Elsevier, vol. 34(C), pages 98-115.
    2. Cristina Vilaplana Prieto & Sergi Jiménez-Martín, 2015. "Unmet needs in formal care: kindling the spark for caregiving behavior," International Journal of Health Economics and Management, Springer, vol. 15(2), pages 153-184, June.
    3. Shinya Sugawara & Jiro Nakamura, 2013. "Is Elderly Care Socialized in Japan? Analyzing the Effects of the 2006 Amendment to the LTCI on the Female Labor Supply," CIRJE F-Series CIRJE-F-888, CIRJE, Faculty of Economics, University of Tokyo.

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