Dynamic Wage and Employment Effects of Elder Parent Care

This paper formulates and estimates a dynamic discrete choice model of elder parent care and work to analyze how caregiving affects a woman’s current and future labor force participation and wages. I model caregiving and work decisions in an intertemporal framework which incorporates parental health changes, human capital accumulation, and job offer availability. The model is estimated on a sample of women from the Health and Retirement Study by efficient method of moments. The estimates indicate that women face low probabilities of returning to work or increasing work hours after a caregiving spell. I use the estimated model to simulate the caregiving, employment, and welfare effects of several elder care policy experiments including a longer unpaid leave than currently available under the Family and Medical Leave Act, a paid leave, and a caregiver allowance. The leaves encourage more work among caregivers by overcoming the labor market frictions many women face. JEL Classification: J14, J18, J22, C51