The Impacts of Free Universal Elderly Care on the Supply of Informal Care and Labour Supply

Abstract

This paper investigates the impact of introducing universal free formal personal care on informal caregiving behaviour in Scotland – in particular, we explore the extent to which free formal care might crowd out the supply of informal care. We estimate, in a difference‐in‐differences framework, that such a reform would: reduce the probability of co‐residential informal caregiving (usually, provided by spouses) by around 18% and, conditional on co‐residential caring, reduce such informal care by 1.3 hours per week. These estimates suggest that an additional hour of formal care displaces approximately 1 hour of such informal care. However, we find no displacement effect on extra‐residential informal caring (often supplied by adult daughters). We also find evidence of increases in labour market participation and hours worked.