How do migrants care for their elderly parents? Time, money, and location François-Charles Wolff...
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How do migrants care for their elderly parents? Time, money, and location François-Charles Wolff (University of Nantes, France) Ralitza Dimova (Brunel University, Uxbridge, UK ) European Conference on Long-Term Care, ZEW Mannheim October 21-22 2005
How do migrants care for their elderly parents? Time, money, and location François-Charles Wolff (University of Nantes, France) Ralitza Dimova ( Brunel
How do migrants care for their elderly parents? Time, money,
and location Franois-Charles Wolff (University of Nantes, France)
Ralitza Dimova ( Brunel University, Uxbridge, UK ) European
Conference on Long-Term Care, ZEW Mannheim October 21-22 2005
Slide 2
Introduction (1) Low fertility rates, increase in life
expectancy => population ageing across the developed (especially
Europe and Japan) world Consequences of the ageing process : fiscal
sustainability of the welfare system. forecast the impact of ageing
on labor supply (McDonald and Kippen, 2001) resolution of the moral
hazard problem of social security, inducing early retirement among
the elderly workers despite the fiscal pressure of increased
longevity (Brsch-Supan, 2003) Focus on the fiscal implications of
population ageing and the related social security and labor market
reforms : => neglected role of the family
Slide 3
Introduction (2) Evidence on the magnitude of upward private
transfers of time and mone US: (HRS)11% of the adult had made a
financial transfer of at least 500$ Sloan et alii (2002) 10%
provided more than 100 hours of personal care to a parent France
upward monetary transfers occur among 8% of the respondents Wolff
(2000) upward service transfers are given by 31% of the respondents
Projected increase in the proportion of elderly citizens in the
population, together with phase-out tendency in the administration
of social security, is bound to raise the importance of family
upward transfers even further Importance of family transfers from a
public policy viewpoint altruistically linked households will
neutralize the impact of government policies phasing out of social
security is likely to induce a suboptimal provision of care and
increase in poverty among the elderly (Pezzin and Schone, 1997) the
problem of optimal provision of care is further aggravated if
upward transfers are the result of either strategic bequest motive
(Bernheim et alii, 1985) or non-cooperative game between siblings
(Byrne et alii, 2005, Hiedemann and Stern, 1999, Engers and Stern,
2002).
Slide 4
Introduction (3) empirical problem: study the impact of care on
the labor supply of care-giving individuals. no clear answer
insignificant impact of informal care on the labor supply of
care-giving individuals Wolf and Soldo (1994), Stern (1995) and
Pavalko and Artis (1997) the impact is significant and negative
Boaz and Muller (1992), Ettner (1995, 1996)
Slide 5
Introduction (4) significant proportion of immigrants in the
labor markets of European economies, and these migrants grow older
analyses of transfers and the impact of transfers on other economic
decisions for both the migrants and their families are absent
particularity of the migrant population search for a better future
while keeping in mind the well-being of families remaining in the
origin country several important questions: where do parents of
migrants live ? how do migrants help their elderly parents ? do the
transfer decisions have an impact on the labor participation ?
Slide 6
Introduction (5) Aim of the paper : (1) presentation of an
altruistic model of transfers, with endogenous childs labor :
relationship between work hours, time transfers and cash gifts of
the child (2) non-structural, econometric analysis based based on
the PRI survey Passage to Retirement of Migrants survey conducted
in 2003 in France on a sample of more than 6000 migrants, aged
above 45 and living in France => our estimates conform with the
predictions of an altruistic model of transfers => informal care
to a parent living in the host country has virtually no impact on
the labor supply of the care-giving child => remittances to
elderly parents in the origin country exercise a strong positive
impact on the labor force participation of the migrant donor
Slide 7
Overview (1) theoretical model of altruistic transfers (2)
description of the PRI survey (3) econometric strategy (4)
determinants of the transfers and labor decisions (5)
conclusion
Slide 8
Theory (1) A simple model of upstream transfers two actors: one
middle-aged individual who has migrated from the origin to the
recipient country one elderly parent the child is assumed to be
altruistic, and hence provide help to the elderly parent informal
care financial transfers Assumptions we neglect the potentially
important interactions between siblings no elaborate data on the
characteristics and behaviors of the siblings we take the location
of the donor and recipient as given the parent may resides in the
origin or the host country
Slide 9
Theory (2) Parentp Childk Childs utility functionU(Ck,lk)
caring for parents is costly : it entails a loss in income U1>0,
U2>0 two type of transfersT money Skservices The child is
altruistic k Parents utility function V(Cp,Sk)V1>0, V2>0
Slide 10
Theory (3) Resource constraints : (1)Hk + lk + Sk = Lk (2)Ck =
w Hk + Yk Tk (3)Cp = Yp + Tk =>Ck + w lk + w Sk + Cp = w Lk + Yk
+ YpIncome pooling Max U(Ck,lk) + k V(Cp,Sk) s.t. resources
constraints The first-order conditions are : (1) w U1 + U2 = 0 (2)
- w U1 + k v2 = 0 (3) U1 + k v1 = 0
Slide 11
Theory (4) Predictions (1) the financial transfer is an
increasing function of the childs income (2) intergenerational
redistribution of resources within the family (3) neutrality
property (Altonji et alii, 1997) (4) the optimal time transfer is
not affected by the distribution of revenues between the two
generations joint determination of labor supply and transfers in
order to fully understand the donors behavior.
Slide 12
Data (1) Survey Passage la Retraite des Immigrs (PRI) data set
Collected by the Caisse Nationale dAssurance Vieillesse and
Institute National de la Statistique et des Etudes Economiques in
Paris between December 2002 and March 2003. Representative sample
of the diverse nationalities of immigrants in France at retirement
age and age close to retirement 6211 observations The PRI sample is
restricted between age groups 45 and 70 (for assuring sufficient
representativeness of all nationalities in the sample) Selected
sample : Respondents under 60, with at least one parent alive N =
2487
Slide 13
Data (2) Transfers : (1) for financial transfers, did you give
money to your parents during the last five years ? (2) for time, do
you actually spend time helping your parents in old age ? Geography
: two location possibilities for the parents of the respondents (1)
either in France (2) or in the country of origin about 28% of the
migrants parents reside in France, while the majority of parents
(72%) reside in the country of origin
Slide 14
Data (3) Shortcomings of the data (1) no continuous variable
for the income of the parent qualitative variable, reported by the
respondent and indicating a different level of lifestyle of the
parent (2) lack of information on wages but empirical construction
of wage rates for non-workers involves issues of identification (3)
focus on discrete decision labor force participation decision to
give money decision to give time
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Figure 1. The provision of upstream transfers, by distance to
parents Survey PRI 2003
Slide 17
Econometric approach (1) (1) Simultaneous estimation of the
decisions related to financial gift, time transfer, and labor
participation we assume that the residuals of each equation follow
a trivariate normal distribution the econometric reduced-form
specification is a simple trivariate Probit model (ML with GHK)
=> but it tells us little about the causal effect of transfer on
the labor participation of the donor (2) we take into account the
endogeneity of transfers Ettner (1995, 1996), Johnson and Lo Sasso
(2003), Soldo and Wolf (1994) a) parents expect children who are
more familiar with domestic tasks (most often daughters) to provide
a higher amount of informal care b) the existence of formal care
substitutes for some time-related services can make it possible for
a child whose opportunity time cost is high to pay for formal care
provision to parents
Slide 18
Econometric approach (2) we split the sample by parental
location when parents live in the origin country : causal effect of
cash gift on the propensity to work when parents live in France :
effect of informal care on the propensity to work the econometric
model that we seek to estimate is : H* = Xh h + t T + h T = Xt t +
t the endogeneity bias stems from the correlation between the
residuals from the two equations : h and t follow a bivariate
normal distribution : simultaneous recursive bivariate Probit model
ML estimation direction of the bias ?No clear a priori
Slide 19
Descriptive results transfers depend crucially on the financial
position of the donor and also on the financial position of the
recipient respondents providing higher level of informal care (to
parents living in France) enjoy higher level of labor force
participation than respondents providing monetary transfers (to
parents residing outside of France) upward transfers of both time
and money reallocate predominantly towards parents of either poor
or fair financial status => more consistent with an altruistic
intergenerational redistribution of resources
Slide 20
Figure 3A. The provision of financial transfer, by respondents
income and parental location Survey PRI 2003
Slide 21
Figure 3B. The provision of time transfer, by respondents
income and parental location Survey PRI 2003
Slide 22
Slide 23
Econometric results (1) trivariate Probit model assumption :
parental characteristics have no direct influence on the work
decision. parental characteristics should strongly influence the
transfer decision estimates are consistent with the altruistic
hypothesis of transfers inverted U-shape impact of the donors
income on the probability of a monetary transfer richer parents are
less likely to receive a financial transfer no impact of either
income or expected wage on the provision of upward time transfers
parents of poorer health are more likely to receive informal
care.
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Econometric results (2) results from recursive, bivariate
Probit models we exclude parents characteristics, households level
of income and home ownership from the labor force participation
equation we exclude from the transfer equations both the variable
indicating problems in reading or writing French and the local rate
of unemployment. (1) sample of immigrants whose parents live in the
origin country exogenous : significant value of 0.348 for the
financial transfer variable in the labor equation endogenous: the
transfer coefficient is equal to 1.319 (i.e. negative correlation
between the error terms from the labor supply and transfer
equation) (2) sample of immigrants whose parents live in the origin
country no significant relationship under the exogeneity assumptuin
no causal impact of the time transfer decision after correcting for
endogeneity
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Conclusion migrants grow older, especially in Europe =>
caring for parents becomes an important concern (1) the location of
parents is a very significant predictor when parents are living in
France, they mainly receive time-related resources when parents
live in the origin country, migrants send primarily cash gifts (2)
upstream transfers are more likely to be consistent with an
altruistic motive poorer parents are more likely to receive cash
gifts time transfers mainly benefit to the most needy parents (3)
does helping parents influence the labor participation of migrants
? IV approach: causal effect of cash gifts on the donors labor
supply no incidence for informal care Results from the causal
analysis stand in contrast with studies performed on natives =>
do migrants and natives have different strategies to care for their
elderly parents? => need of comparative analyses