CPR Working Paper Series No. 37
Intergenerational Labor Market and Welfare Consequences of Poor Health
Thomas
J. Kniesner and Anthony T. LoSasso
Fall 2001
(Revised from March 2001)
Abstract: Our research provides new econometric evidence
concerning partial economic risk sharing between a frail elderly
parent and an adult child. We
estimate a jointly determined limited dependent variables system
explaining the parent’s entry into a nursing home, the adult
child’s visits to the parent, and the adult child’s labor
supplied. The time
allocation of adult sons is unaffected by a parent’s frail health.
Adult daughters who visit a frail elderly parent daily
decrease their annual labor supplied by about 1,000 hours annually,
largely through labor force non-participation.
The implied welfare loss to the daughter from a frail elderly
parent in need of frequent visits is about $180,000.
Our results run counter to the moral hazard argument against
long-term care insurance and clarify the two sides’ positions in
the policy debate over the degree of generosity of recently proposed
tax credits for adult children who help care for sick aged parents.
A revised version of this paper appears in Research in Labor Economics, Volume 20, "Worker Wellbeing in a Changing Labor Market."
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