The Effect of Elderly Care-giving on Female Labour Supply in Indonesia

In developing countries without universal social safety nets, co-residence between older parents and adult children is a central feature of old-age security arrangements. However, the impact of the health status of elderly on adult care-giving members’ labour supply is less well-known. In this paper we use data from the 2000 Indonesian Family Life Survey (IFLS 3), to examine the impact of care-giving for elderly household members on the labour supply of co-resident adults, particularly females. The empirical strategy in this paper estimates the impact on labour force participation, controlling for the possible endogeneity of elderly co-residence, using instrumental variables. Instrumental Variables regression models for working and working hours show that care-giving reduces the probability of participation in the labour market and working hours. The main findings are that (i) care-giving negatively impacts on labour force participation for two alternative measures of health used in the care-giving definition across all our models; (ii) these results persist when the labour participation decisions are jointly determined (as in the IV3SLS estimates) and (iii) there appear to be significant differences in the way that care-giving impacts upon males’ and females’ participation decisions and work-hours. JEL classification: J12, O12