Informal care and labor market participation

Understanding the effect of informal care for an elderly or disabled person on labor market outcomes is important for developing policies targeted towards caregivers. However, because of omitted variables bias, simple cross-sectional relationships may provide a misleading picture of the causal impact of informal care provision on labor force status. To address this, I use panel data for the period 2001–2007, which make it possible to track the same individuals over time, and observe how their outcomes alter as their care arrangements change. While caregiving does appear to have a modest negative impact on labor force participation, this impact is only one-quarter to one-sixth as large in the panel as in the cross-section. Taking account of individual heterogeneity, the impact of caregiving on other labor force outcomes (and on life satisfaction) seems to be small or non-existent. Large estimated effects from cross-sectional regressions are most likely driven by individual heterogeneity. One possible interpretation of this result is that the impact of caregiving on labor market outcomes and life satisfaction takes several years to manifest itself. Another is that the causal effect of caregiving on labor force outcomes and life satisfaction is quite small.