The Cyclicality of Informal Care
Abstract
The Cyclicality of Informal CareCorina Mommaerts (Wisconsin) and Yulya Truskinovsky (Harvard)*
Over 40 million Americans provide unpaid informal care to the elderly, and many caregivers are
themselves nearing retirement. This paper investigates the role of macroeconomic conditions on the
decision to provide informal care, and explores the consequences of this decision for the well-being of
the elderly and their relative caregivers.
There is reason to suspect that informal care is countercyclical. First, standard models of labor
supply predict that informal care should increase in times of higher unemployment, as the opportunity
cost of time falls. Second, downturns may reduce the wealth of both the elderly and their potential
caregivers, which may limit their ability to pay for formal long-term care services. Families may
substitute towards a lower cost option, thus increasing the demand for informal caregiving. Similarly, if
public funding for elderly support services decreases during downturns, individuals may be more likely
to turn to informal options for care.
The cyclical nature of informal care may have large implications for the well-being of both the
elderly and their informal caregivers. Exiting the labor force during economic downturns to provide
informal care may exacerbate the long-term negative consequences of recessions on individuals
approaching retirement (Coile et al. 2014). For the elderly, on the other hand, informal care may provide
relief from from costly formal long-term care expenses. In addition, it is well established that mortality
and morbidity are higher when the economy is strong (Ruhm, 2000), and for the elderly in particular
(Stevens et al. 2015). Higher rates of informal care during downturns would suggest a new channel for
the procyclicality of elderly mortality.
We address this question using three data sets that report consistent, nationally representative
measures of informal caregiving over multiple time periods: the Health and Retirement Study, the
*Mommaerts: cmommaerts@wisc.edu; Truskinovsky: ytruskinovsky@hsph.harvard.edu
American Time Use Survey, and Gallup Daily tracking data. To identify the effect of macroeconomic
conditions on informal caregiving, we follow a standard approach in the literature on procyclicality and
health that exploits differences in economic conditions across states and over time (Ruhm, 2000). Our
main set of regressions take the following form:
Y X E ijt = αt + Sj + β ijt + γ jt + εijt
in which Y is a measure of informal care given to or by individual i in state j at time t. and are ijt αt Sj
time and state fixed effects, respectively, and X is a vector of demographic controls. is a measure ijt Ejt
of state j’s economic conditions (e.g. the state unemployment rate) at time t, and γ is the coefficient of
interest. This approach controls for potentially confounding determinants of informal care that (a) vary
uniformly across states over time by including year fixed effects and (b) time-invariant determinants of
informal care that differ across states by including state fixed effects. To test the robustness of our
results, we also use other measures of macroeconomic conditions, as well as exploit more localized
variation in economic conditions when our data allow for it.
This project makes three main contributions. First, our findings will add to a growing literature
about the effects of economic downturns on economic and physical well-being by focusing on two
groups who are especially vulnerable to macroeconomic fluctuations: providers and recipients of
informal elder care. Relatedly, we offer a potential mechanism -- informal care -- through which the
procyclicality of elderly mortality operates. Second, we provide a thorough analysis of informal care in
the United States by exploiting the strengths of several datasets that allow for a more nuanced portrait of
caregiving. Finally, we anticipate that our findings will contribute to policy discussions about the future
of long-term care and paid leave policies as the populations of both providers and recipients of informal
care continue to grow