Willingness to Care—Financial Incentives and Caregiving Decisions

As population aging will likely lead to an increasing number of people in need of care, the demand for informal care is expected to rise. In this context, it is often discussed whether financial incentives can motivate more individuals to assume caregiving responsibilities. We analyze the potential effect of financial incentives on the provision of informal care by estimating a structural model with endogenous labor supply and caregiving decisions. This allows us to investigate how both individual wages and financial compensations for caregiving affect the caregiving decision, while accounting for heterogeneous preferences. We find that wage increases are associated with a decreased willingness to care. Financially compensating potential carers for the opportunity costs from caregiving significantly increases the probability of providing care. However, across different subgroups, a large share of about 50% of potential carers remains unwilling to provide care despite the financial incentive. For these individuals, factors such as preferences and social norms outweigh financial considerations in their caregiving decision.