Job Market Paper
Abstract: This paper studies the determinants of elderly care arrangements in Europe, where there is a substantial degree of heterogeneity in the use of formal and informal care. In order to explain this fact, I develop and estimate a structural model representing working-age individuals and their parents making decisions on care and labor supply in a static, non-cooperative game of complete information. Using the estimated model to simulate families' choices in several counterfactual scenarios, I find that preferences are largely responsible for the different outcomes across countries, followed by wages. Parental health, geographical proximity to children, and access to informal care from spouses and other sources are less influential.
Abstract: This paper analyzes the interaction between labor supply decisions and the provision of care to elderly parents by working-age individuals in Europe. Using a sample assembled from European survey data, first I document the existence of differences in employment status between people who provide care and those who do not. In the second place, I estimate the effect of informal care provision on employment and hours worked through several reduced-form specifications. Depending on the specification, this effect is negative and small, or not statistically different from zero. Next, I build a static structural model which characterizes the trade-offs in terms of time allocation and care arrangements faced by a working-age individual with an elderly parent. Finally, I use the estimated model to simulate the reactions of agents in several policy experiments.