August 2018

IZA DP No. 11774: Thinking of Incentivizing Care? The Effect of Demand Subsidies on Informal Caregiving and Intergenerational Transfers

revised version published online as 'Do Public Caregiving Subsidies and Supports affect the Provision of Care and Transfers?' in: Journal of Health Economics, 25 May 2022, 102639102639

We study the effect of demand-side subsidies to old age care recipients on both caregiving and intergenerational transfer decisions. We exploit two quasi-natural experiments referring to the inception of a universal and unconditional caregiving allowance in 2007 and its subsequent reduction in 2012. We find that the introduction of a caregiving allowance of a magnitude up to 530€ in 2011 increased the probability of informal caregiving by 32% and the intensity of care in 13.5 days/year. Consistently, we find that downstream (upstream) intergenerational transfers increased (decreased) in a magnitude of 29% (15%). The effects concentrate among middle and lower income households and were attenuated by the reduction of the subsidy.