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Family and Social Transfers for an Aging Population

Paper Session

Saturday, Jan. 6, 2018 8:00 AM - 10:00 AM

Marriott Philadelphia Downtown, Grand Ballroom Salon C
Hosted By: American Economic Association
  • Chair: Gopi Shah Goda, Stanford University

The Cyclicality of Informal Care

Yulya Truskinovsky
Harvard University
Corina Mommaerts
Yale University


The Cyclicality of Informal Care
Corina 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

Medicaid Crowd-out of Long-term Care Insurance With Endogenous Medicaid Enrollment

Geena Kim
U.S. Congressional Budget Office


Medicaid Crowd-Out of Long-Term Care Insurance
with Endogenous Medicaid Enrollment
Geena Kim
Congressional Budget Office*
March 14, 2017
With states facing tightening Medicaid budgets, the high cost of financing long-term care for the
elderly through Medicaid has prompted proposals to make private long-term care insurance
(LTCI) more affordable through tax incentives. The effectiveness of tax incentives for
stimulating LTCI demand depends in part on the availability of Medicaid, since it could be
considered a partial substitute for LTCI. This paper examines the impact of tax subsidies and
Medicaid provisions on the demand for LTCI by developing and estimating a stochastic dynamic
model of the decision to purchase private long-term care insurance. A key contribution of this
paper is that the model also incorporates and accounts for endogenous decisions on Medicaid
enrollment, nursing home use, and asset holdings, which reduce estimates of the Medicaid
crowd-out effect on LTCI demand. The parameters of the model are estimated using individual
level data from the Health and Retirement Study for the years 1998 to 2002 by simulated
maximum likelihood. Using the estimated parameters, counterfactual policy experiments are
performed to investigate the effects of tax policy and Medicaid on LTCI demand. The main
finding is that both effects are small. The estimated price elasticity of the LTCI demand is small,
implying that tax subsidies are expected to have only a limited effect in reducing the number of
Geena Kim
Page 2
uninsured. Eliminating the Medicaid program increases LTCI holding only slightly, implying
that the demand for LTCI would remain small even without Medicaid.
*Disclaimer: This abstract has not been subject to CBO’s regular review and editing process.
The views expressed here should not be interpreted as CBO’s

Time and Money: Social Security Income and Transfers with Children

Anita Mukherjee
University of Wisconsin


Submission to CSWEP AEA Sessions 2018
“Returns to Wealth in Disability-Free Life Expectancy”
March 15, 2017
Submitted by:
Anita Mukherjee
Assistant Professor (tenure-track, PhD 2014)
Risk and Insurance Department
Wisconsin School of Business
University of Wisconsin-Madison
Tel: 608-262-8602
E-mail: anita.mukherjee@wisc.edu
Additional Info: No prior AEA presentations.
Anita Mukherjee, University of Wisconsin-Madison
Submission to CSWEP AEA Sessions 2018 Page 1
“Returns to Wealth in Disability-Free Life Expectancy”
Extended Abstract
Recent papers have documented a striking correlation between income and life expectancy: for example, using data from the U.S., Chetty et al. (2016) document that “at 40, the
richest men could expect to live to 87 while the bottom 1 percent had a life expectancy of just
above 72 – equal to the average in a developing country like Sudan.” While the literature has
found that these gains in life expectancy that come with wealth include disability-free years
(Meara et al. 2008), little is known about the ways in which these correlations have changed over
time. I plan to calculate the return to wealth in disability-free life expectancy over time for
different cohorts to inform economic theories about the consequences of inequality in old age.
This and related analyses are highly relevant in today’s policy environment given disparities in
wealth and the burgeoning aging population.
This research is also motivated by Social Security policy changes that could increase the
eligibility age for full retirement, since a subgroup of people may be systemically vulnerable to
living on disability rolls for longer than expected. I plan to begin my study by generating new
stylized facts using 20 years of Health and Retirement Study (HRS)1
data, which I am already
familiar with through my other ongoing work. Because the HRS also contains detailed
information on financial portfolios, family structures, health behaviors, risk attitudes, and other
characteristics, I can use these data to uncover mechanisms relating to differences in disability by
wealth. For example, Crimmins et al. (1989) suggest the access to healthcare is an important
mechanism by which wealth

Effects of Elderly Care for an Aging Population on the Labor Market

Jessie Wang
Furman University, University of California-San Diego


Aging population is a worldwide phenomenon. Households in these aging societies face many challenges with this demographic change and one of them is the increasing parental care responsibilities. Wang(2017) finds that responses to parental health shock are heterogeneous in female wages and high-wage females will work more to purchase market care. To explore the effect of parental care responsibilities on female labor supply, the labor market, and the care market, I propose an overlapping generation model where the young generation takes care of the old generation. Agents in the young generation are heterogeneous in their production ability and they can supply labor to two sectors that produce consumption goods and care. To calibrate the model, I draw data from the Current Population Survey and the Health and Retirement Survey to match the current labor market and the empirical estimates in Wang(2017). I also conduct a quantitative experiment to predict how the female labor market changes in the projected aging population structure. Using the census population projection, I find that when there is access to the care market for care services and jobs, female labor supply will increase as parental care responsibilities increase.
Wang, Jue (Jessie). 2017. “Hire or Care: The Effects of Aging Parents on Household Labor Supply.” Working Paper.
Courtney Van Houtven
Duke University
Lee Lockwood
University of Virginia
Claudia Goldin
Harvard University
Kosali Simon
Indiana University
JEL Classifications
  • I0 - General
  • Z1 - Cultural Economics; Economic Sociology; Economic Anthropology