Intergenerational household formation, female labor supply and informal caregiving - A bargaining approach

Children's provision of in-kind services to their elderly parents (informal caregiving) represents an important form of economic transfers to the elde rly. In this paper we develop and estimate a joint model of informal caregi ving and labor force participation decisions of adult daughters who have a frail elderly parent in a broader framework of intergenerational household formation. Parent and daughter agree to a Nash bargaining rule as the solut ion to the household formation and intrahousehold decision making process. However; rather than severed relationships, the threat point is given by a noncooperative equilibrium defined in terms of voluntary contributions towa rd a public good the parental "well-being.'' Maximum likelihood parameter e stimates derived front the simultaneous, multiequation, endogenous switchin g model are generally consistent with expectations. Our results indicate th at competing demands on daughters' time reduce both coresidence and informa l caregiving. We also find that intergenerational coresidence is an importa nt mode of assistance to elderly per sons. A simulation bused on the estima ted parameters suggests that public programs designed to meet the long-term care needs of elderly persons by subsiding formal horne care services may have substantial effects on intergenerational living and care arrangement d ecisions.