Parental Illness and the Labour Supply of Adult Children

An important demographic trend is the aging of the population. As a result, demand for health care services for the sick and elderly is likely to increase. Since care for the sick and elderly is often provided informally by family members, parental illness may have important implications for the labour supply of adult children. Although previous studies show a negative relationship between hours worked and caregiving, they do not account for the potential endogeneity of the parental living arrangement to the child's labour supply. Using panel data and controlling for such endogeneity, I find that caregiving and cohabiting with a sick, elderly parent appear to have smaller effects on labour supply than the past literature suggests. Nonetheless, since cohabiting with a sick elderly parent does have negative effects on the labour supply of women and given that this form of living arrangement is relatively common, the aggregate costs associated with informal caregiving in an intergenerational living arrangement are considerable.