How do women respond to increased care needs of their parents? The economic costs of informal caregiving

When a person becomes care-dependent, family members often provide informal care. This paper examines the economic impact of informal caregiving, with a particular focus on women who care for their ageing parents. Using data from the Survey of Health, Ageing and Retirement in Europe (SHARE), covering 24 countries, we estimate the effect of caregiving on labour supply and quantify its associated costs in terms of Gross Domestic Product (GDP). Our findings confirm that women typically respond to worsening parental health by increasing their provision of informal care. Women with parents in poor health have a 5% to 13% higher probability of providing informal care, depending on the region of Europe. Furthermore, our results show that women who take on caregiving responsibilities experience significant reductions in labour supply, especially in Southern, Western, and Central/Eastern European countries, with reductions ranging from 30% to 70%. We also show that the economic cost of these reductions in labour supply is considerable, with a GDP reduction ranging from 0.37% in Western Europe to approximately 0.45% in Southern and Central/Eastern Europe. These results highlight the significant economic consequences of informal caregiving and stress the need for policy measures that support reconciling caregiving with labour market participation. Expanding formal long-term care systems, providing caregiver support, and investing in healthy ageing policies could help address these economic pressures.