Lifting the Burden: State care of the elderly and the location and labor supply of adult children

In this paper, we use a 1998 reform in the federal funding of local home-based care for the elderly in Norway to examine the effects of formal care expansion on the labor supply decisions and mobility of middle-aged children, particularly women. In preliminary results, we find significant positive impacts of formal care expansion on the labor supply of adult children of single elderly parents, including decreases in the probability of work absences longer than 2 weeks, and increases in the probability of working. These effects are strongest for daughters (relative to sons), for first-born children, and for daughters living in the same muncipality as their parents. Our results provide evidence of substitution between formal home-based care and informal care by daughters.