Effects of Informal Parental Care on Labor Force Participation in the Nordic Countries

Abstract

The current and future funding of elderly care is an important issue for national budgets. The demand for care will increase vastly due to the ageing population. At the same time, the number of informal caregivers comprising mainly family members and friends is decreasing because of the demographic transition, the de-familiarization process and increased labor force participation of women. Governments are trying to find the best strategy to balance the provision of care between state, market, and relatives. There is however no consensus about the effects of informal care on labor market related outcomes. In this thesis, the effect of informal parental care on the labor force participation of caregivers in Norway, Sweden and Denmark is analyzed, using data from a longitudinal internet-based survey conducted in 2010. Caregiving is instrumented by variables related to the health status of the parents. Thereby the potential endogeneity existing between informal care and employment is controlled for. Informal parental care is generally found to be unrelated to employment. However, intensive informal parental caregivers, implying caregivers providing at least 30 hours of care per month, have a significant lower probability of being employed. There are no gender or country differences in this effect. Further, exogeneity cannot be rejected in the relationship between parental care and employment. This thesis suggests that the Nordic countries can be grouped together in informal care-related issues and that small amounts of informal care could be promoted to relax the national budget.