Outsourcing At-home Elderly Care and Female Labor Supply: Micro-level Evidence from Japan's Unique Experience

This is the first study to take advantage of Japan's public long-term care insurance as a unique and natural experiment to evaluate how outsourcing long-term care spurs female labor supply. We utilize our unusual and rich panel data from households with an elderly person who needs care and who became eligible to use care services through the public insurance after 2000, and those who are not eligible to use care service. Our empirical results based on the difference-in-difference estimates demonstrate that the stimulating effect of the public elderly care insurance on female labor supply was observed only for households with a less-needy care receiver in care-level 1 in FY 2001, one and a half years after the initiation. However, we clearly find a large and positive effect on the female labor supply in households in FY 2002, two and a half years after the implementation. The new public scheme enhanced the probability of being employed by 30 percent to 60 percent, working days per week by 40 percent to 60 percent and working hours per day by 50 percent to 70 percent.