how do migrants care for their elderly parents? time, money, and location françois-charles wolff...

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

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

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).

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)

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 ?

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

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

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

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

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

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.

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

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

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

Figure 1. The provision of upstream transfers, by distance to parents Survey PRI 2003

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

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

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

Figure 3A. The provision of financial transfer, by respondents income and parental location Survey PRI 2003

Figure 3B. The provision of time transfer, by respondents income and parental location Survey PRI 2003

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.

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

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

how do migrants care for their elderly parents? time, money, and location françois-charles wolff...

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