The Impacts of Free Universal Elderly Care on the Supply of Informal Care and Labour Supply*

Abstract

This paper investigates the impact of introducing universal free formal personal care on informal caregiving behaviour in Scotland – in particular, we explore the extent to which free formal care might crowd out the supply of informal care. We estimate, in a difference-in-differences framework, that such a reform would: reduce the probability of co-residential informal caregiving (usually, provided by spouses) by around 18% and, conditional on co-residential caring, reduce such informal care by 1.3 hours per week. These estimates suggest that an additional hour of formal care displaces approximately 1 hour of such informal care. However, we find no displacement effect on extra-residential informal caring (often supplied by adult daughters). We also find evidence of increases in labour market participation and hours worked.