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 MannheimOctober 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 (Börsch-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 respondentsWolff (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 negativeBoaz 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 populationsearch 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 child’s labor : relationship between work hours, time transfers and cash gifts of the child

(2) non-structural, econometric analysis based based on the PRI surveyPassage to Retirement of Migrantssurvey 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 countryone 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 behavior’s of the siblings

– we take the location of the donor and recipient as giventhe parent may resides in the origin or the host country

Theory (2)• Parent p• Child k

• Child’s utility function U(Ck,lk)

caring for parents is costly : it entails a loss in income U1>0, U2>0

two type of transfers T moneySk services

• The child is altruistic k

• Parent’s 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 + Yp Income 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 child’s 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 donor’s behavior.

Data (1)• Survey Passage à la Retraite des Immigrés (PRI) data set

• Collected by the Caisse Nationale d’Assurance 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 aliveN = 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

Table 1. The pattern of upstream transfers Variables Parents living

in France Parents living in the

origin country All

Rate of transfer (in %) Time 24.8 4.7 10.3 Money 5.1 26.5 20.6 Portfolio (in %) No transfer 71.8 70.9 71.2 Money only 3.3 24.4 18.5 Time only 23.1 2.6 8.3 Money and time 1.7 2.1 2.0 Labor supply (in %) Participation 77.1 66.4 69.4 Number of observations 689 1798 2487 Survey PRI 2003.

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

0

10

20

30

40

France <10kms France 10-49kms France >50 kms Near country Other country

%

Time

Money

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 + hT = 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 modelML 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 respondent’s income and parental location

0

10

20

30

40

Quartile 1 Quartile 2 Quartile 3 Quartile 4

%

Parents living in France

Parents in the origin country

Survey PRI 2003

Figure 3B. The provision of time transfer, by respondent’s income and parental location

0

10

20

30

40

Quartile 1 Quartile 2 Quartile 3 Quartile 4

%

Parents living in France

Parents in the origin country

Survey PRI 2003

Table 2. The pattern of labor participation and transfers, by respondent’s origin country Origin country

(in %) Labor

participation Financial Transfer

Time transfer

Parents in France

Number of observations

Europe 78.1 10.1 12.0 36.9 1153 Northern Europe 67.2 3.5 9.2 15.5 174 Eastern Europe 72.7 37.4 9.1 19.2 99 Southern Europe 80.8 8.3 12.8 43.1 880 Italy 77.3 1.9 16.2 65.7 216 Spain 81.8 4.7 17.3 53.3 214 Portugal 82.0 13.1 9.1 27.4 449 Africa 59.7 30.7 9.0 18.8 1023 Northern Africa 56.8 28.1 9.4 20.0 855 Algeria 51.8 18.2 11.1 30.4 369 Morocco 54.7 35.7 9.0 12.6 333 Tunisia 73.9 35.3 5.9 11.1 153 Southern Africa 74.4 44.1 7.1 12.5 168 America 73.5 26.5 1.5 10.3 68 Middle East 53.9 21.2 9.6 15.4 104 Asia 77.7 29.5 10.8 35.3 139 All 69.4 20.6 10.3 27.7 2487 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 donor’s 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.

Table 4. Reduced-form estimates of labor supply, time and financial transfers Variables Labor participation Financial transfer Time transfer coef t-test coef t-test coef t-test Constant 1.836*** 3.60 -2.694*** -4.70 -2.097*** -2.92 Respondent’s characteristics Female -0.761*** -12.49 -0.204*** -2.98 0.130 1.58 Age -0.018** -2.19 0.005 0.54 0.023* 1.97 Lives with a partner -0.095 -1.14 0.109 1.09 0.003 0.02 Number of children at home -0.087*** -4.23 -0.008 -0.38 -0.038 -1.22 Number of children outside -0.112*** -4.47 -0.059** -2.10 -0.048 -1.30 Years of education 0.051** 2.49 0.008 0.34 0.005 0.15 Years of education squared (10e-2) -0.012 -1.09 0.008 0.67 0.013 0.84 Health problem -0.567*** -8.36 0.071 0.89 0.000 0.00 Duration of migration 0.052*** 4.21 0.074*** 4.28 -0.005 -0.30 Duration of migration squared (10e-2) -0.076*** -3.68 -0.140*** -4.33 0.013 0.47 Problems in reading or writing French -0.060 -0.97 Household’s income (10e-5) 0.810*** 3.95 0.228 0.38 Household’s income (10e-10) -0.082** -2.03 -0.354 -0.61 Home ownership -0.084 -1.17 -0.042 -0.47

Table 4. Reduced-form estimates of labor supply, time and financial transfers Variables Labor participation Financial transfer Time transfer coef t-test coef t-test coef t-test Parental characteristics Number of siblings 0.018* 1.66 -0.028* -1.93 Both parents alive -0.029 -0.41 -0.084 -0.98 Health problems 0.124* 1.90 0.821*** 8.90 Financial status Very poor Ref Ref Poor -0.051 -0.52 0.003 0.02 Fair -0.237** -2.54 -0.182 -1.54 Rich -0.372*** -3.08 -0.153 -1.00 Location In France. less than 10kms Ref Ref In France. 10-50 kms 0.220 1.06 -0.653*** -4.34 In France. more than 50 kms 0.306 1.42 -0.812*** -5.00 Foreign country. near 0.414** 2.11 -1.128*** -6.75 Other foreign country 1.028*** 7.45 -1.270*** -11.07

Table 4. Reduced-form estimates of labor supply, time and financial transfers Variables Labor participation Financial transfer Time transfer Coefficients of correlation Labor force participation 1 - 0.175*** 3.93 0.089 1.60 Financial transfer 1 - 0.271*** 4.46 Time transfer 1 - Number of observations 2487 Log likelihood -2909.1

Econometric results (2)• results from recursive, bivariate Probit models

we exclude parents’ characteristics, household’s level of income and home ownership from the labor force participation equationwe 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 equationendogenous: 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 assumptuinno causal impact of the time transfer decision after correcting for endogeneity

Table 5. Estimates of the impact of financial transfers on labor supply, parents living abroad Simultaneous model with endogenous transfer Variables Labor force

participation Labor participation Financial transfer coef t-test coef t-test coef t-test Constant 1.837*** 2.97 1.498** 2.42 -2.051*** -3.00 Respondent’s characteristics Female -0.833*** -11.30 -0.638*** -6.61 -0.243*** -3.18 Age -0.018* -1.80 -0.016* -1.71 0.003 0.25 Lives with a partner -0.212** -2.08 -0.229** -2.26 0.093 0.84 Number of children at home -0.098*** -4.11 -0.089*** -3.85 0.003 0.13 Number of children outside -0.097*** -3.34 -0.073** -2.55 -0.042 -1.44 Years of education 0.061*** 2.63 0.054** 2.43 0.011 0.45 Years of education squared (10e-2) -0.019 -1.51 -0.019 -1.63 0.005 0.36 Health problem -0.571*** -7.07 -0.544*** -6.66 0.094 1.08 Duration of migration 0.055*** 3.30 0.031 1.59 0.064*** 2.92 Duration of migration squared (10e-2) -0.081** -2.40 -0.039 -1.02 -0.113*** -2.58 Problems in reading or writing French -0.074 -1.00 -0.082 -1.21 Household’s income (10e-5) 1.201*** 5.91 Household’s income (10e-10) -0.126** -2.36 Home ownership -0.115 -1.52 Rate of departmental unemployment -0.042*** -2.75 -0.034** -2.30 Parental characteristics YES Financial transfer Exogenous 0.348*** 4.20 Endogenous 1.319*** 6.17 Coefficients of correlation (t-test) -0.636*** (-4.41) Number of observations 1798 1798 Log likelihood -929.8 -1816.4

Table 6. Estimates of the impact of time transfers on labor supply, parents living in France Simultaneous model with endogenous transfer Variables Labor force

participation Labor participation Time transfer coef t-test coef t-test coef t-test Constant 4.790*** 3.45 4.803*** 3.04 -2.365 -1.59 Respondent’s characteristics Female -0.499*** -4.15 -0.506*** -3.79 0.410*** 3.14 Age -0.033* -1.73 -0.034 -1.58 0.043** 2.10 Lives with a partner 0.138 0.91 0.143 0.90 -0.148 -0.79 Number of children at home -0.093* -1.95 -0.091* -1.88 -0.084* -1.66 Number of children outside -0.175*** -3.31 -0.174*** -3.12 -0.059 -0.98 Years of education -0.020 -0.38 -0.021 -0.34 0.042 0.72 Health problem -0.609*** -4.58 -0.614*** -4.24 0.143 0.99 Duration of migration -0.080* -1.71 -0.079 -1.35 -0.048 -1.02 Duration of migration squared (10e-2) 0.090 1.42 0.088 1.14 0.058 0.89 Problems in reading or writing French -0.020 -0.16 -0.021 -0.15 Household’s income (10e-5) 0.587 0.62 Household’s income (10e-10) -0.599 -0.62 Home ownership -0.167 -1.09 Rate of departmental unemployment -0.068*** -2.58 -0.068** -2.49 Parental characteristics YES Time transfer Exogenous 0.112 0.83 Endogenous 0.180 0.52 Coefficients of correlation (t-test) -0.048 (-0.21) Number of observations 689 689 Log likelihood -307.0 -613.7

Conclusion• migrants grow older, especially in Europe => caring for parents becomes an

important concern

• (1) the location of parents is a very significant predictorwhen parents are living in France, they mainly receive time-related

resourceswhen parents live in the origin country, migrants send primarily cash gifts

(2) upstream transfers are more likely to be consistent with an altruistic motivepoorer parents are more likely to receive cash giftstime 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 donor’s labor supplyno 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