Do Couples Self-Insure? The Effect of Informal Care on a Couple’s Labor Supply

Abstract

How does informal care provision to an elderly parent affect the labor supply outcomes of a couple? Previous work examines the relationship between caregiving and the labor market decisions of the care provider, but ignores any labor supply response of the spouse to such decisions. Using data from the Health and Retirement Survey, we examine how informal care provision affects the labor supply of both members of a couple, at both the intensive and extensive margins. Such analysis is especially important for evaluating informal care’s potential effect on retirement timing and household wealth accumulation. We find that providing personal care to an elderly parent reduces a married man’s chance of working by 3.2 percentage points, but providing such care does not affect a married woman’s chance of working. Additionally, male labor force decisions remain inelastic in response to the wife’s caregiving behavior. Working married women do adjust their hours of work in response to caregiving, but in the opposite direction that within-couple insurance would suggest. Instead, the woman increases her work by one hour a week if she is the only care provider, and decreases her work when the husband is the only care provider. When both members of the couple provide informal care these effects cancel out.