The Shadow Prices of Voluntary Caregiving: Using Panel Data of Well-Being to Estimate the Cost of Informal Care

Rebecca McDonald and Nattavudh Powdthavee

No 11545, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper uses the wellbeing valuation (WV) approach to estimate and monetize the wellbeing impacts of informal care provision on caregivers. Using nationally representative longitudinal data from the U.K., we address two challenging methodological issues related to the economic valuation of informal care: (i) the endogeneity of informal care; and (ii) the sensitivity of income estimates used in valuation. We address the endogeneity issue by decomposing wellbeing losses into those associated with caring for a relative who had recently suffered a serious accident and those associated with caring for a relative who had not had an accident. We use of the Fixed Effects Filtered (FEF) estimator to enable the permanent income coefficient to be estimated free from individual fixed effects bias. This estimate is used instead of the transient income effect in the calculation of shadow prices of informal care. Our estimates suggest that permanent income would have to increase by approximately £102k per year on average to just compensate for the wellbeing losses from providing informal care.

Keywords: permanent income; compensation variations; well-being; informal care; happiness; shadow prices (search for similar items in EconPapers)
JEL-codes: H8 I18 I31 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-05
New Economics Papers: this item is included in nep-hap, nep-hea, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published - published online in: Journal of Benefit-Cost Analysis , 2024

Downloads: (external link)
https://docs.iza.org/dp11545.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp11545

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().