Kuan-Ming Chen, Understanding Adult Children’s Labor Supply, Responses to Parents’ Long-Term Care Needs
Job talk. Kuan-Ming Chen is a PhD candidate at the University of Chicago. He will present the paper "Understanding Adult Children’s Labor Supply, Responses to Parents’ Long-Term Care Needs".
How do adult children trade-off working and providing long-term care (LTC) to parents? How do commonly implemented LTC policies, such as tax deductions, in-kind transfers, and international caregivers’ eligibility, affect such trade-offs? What are the welfare effects of these policies? These questions have become increasingly important due to the number of people affected and the costs adult children incur. Using data from Taiwan, I first document that children are 4 percentage point less likely to participate in the labor market when parents’ LTC needs arise, with daughters, the less educated, and older children having the largest decreases in labor supply. Only a small share of children return to the labor market if their LTC-needing parents pass away. Motivated by the descriptive findings, I then build and estimate a dynamic labor supply model, combining the descriptive evidence with an exogenous variation in caregivers’ prices from a policy reform in Taiwan. The model features costs of returning to work, endogenous health processes, and unobserved heterogeneity in care and labor market skills. Model-based results suggest large costs of returning to work, especially for daughters and the less educated. Typical LTC policies, such as LTC tax deductions and relaxing the eligibility criteria for hiring international caregivers, alleviate the effects of costs of returning to work on labor supply under LTC needs, in part because of work incentives these policies provide.
Host: Halvor Mehlum