Labor Supply at Midlife and the Care of Elderly Parents

Johnson, Richard

Abstract

Rising labor force participation rates of married women and declining overall mortality rates threaten to weaken the ability of the family to provide informal care to the frail elderly. As the total number of persons in need of personal care assistance rises, women's increased work responsibilities may become incompatible with their historical caregiving responsibilities. This project will explore the level of informal care provided by adult children at midlife to their elderly parents and evaluate the relationship among labor supply, time transfers, and nursing home residence. Using longitudinal data from the Health and Retirement Study, this project will examine the factors influencing the provision of time assistance by adult children to their elderly parents, the determinants of labor supply at midlife, and the interactions between labor supply and the level of informal care provided. The project will investigate the role of nursing home residence in the determination of labor supply and informal care, as well as the impact of demographic characteristics, child and parent health, human capital of the child, sibling characteristics, characteristics of the child's spouse, and the presence of young children. Full-information maximum likelihood techniques will be employed to estimate latent simultaneous panel data models of annual hours of paid work, annual hours of time assistance to elderly parents, and parental nursing home residence. The samples will be restricted to persons age 45-64 with exactly one living elderly parent. Unlike many previous studies of caregiving and labor supply that have been based on samples of active caregivers or have lacked information on the number of hours of care provided, this study will examine family decisions about whether or not to provide any care as well as decisions about the intensity of care provided. By utilizing multiple waves of data, the model will be able to control for unobservable individual heterogeneity, which can bias results in the simple cross-sectional analyses that have dominated the literature to date. The project will also lay the groundwork for a more ambitious follow-up project that adds financial transfers to the model and more fully incorporates parental living arrangements.