Aging Parents, Health Care, and the Family; Estimating a Structural Model

We develop a structural model of inter-sibling decision making to analyze the process of informal care provision by adult children to their parents. Each child chooses the number of visits paid to parents and the amount of time actually spent on providing care, taking into account opportunity costs in terms of time and money, and the behavior of siblings. A key element in the analysis is the distinction between cooperative and non-cooperative equilibria. A tentative data exploration using SHARE reveals that the stylized empirical facts are consistent with qualitative predictions from the model: children provide more care the larger the difficulties their parents experience in daily life; children provide less care when they live farther away and when they are more involved in paid work; and the occurrence of conflicts in families is associated with less care provided. To estimate the parameters of the structural model we formulate the model as a discrete choice problem. Maximum simulated likelihood will be used to obtain estimates of the parameter values. We indicate how the model can be used to assess the effects of a variety of policy measures aimed at encouraging the provision of low-cost informal care, such as compensating travel expenses, compensating informal care, changing the price of formal care, and promoting cooperative sibling behavior. One important issue is the possibility of unintended side effects, such as discouraging labor force participation.