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Conference Paper BHPS-2005 Conference: the 2005 British Household Panel Survey Research Conference, 30 June -2 July 2005, Colchester, UK

The chicken or the egg? Endogeneity in labour market participation of informal carers in England


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Informal care is a vital pillar of the British welfare state. A well-known fact in the
small economic literature on informal care is the apparent negative relation between
care responsibilities and labour market participation. Yet, caring and labour market
participation may be endogenous, i.e. some individuals may take-up informal care to
bridge spells of unemployment or job search. Using both an instrumental variable
approach and panel data techniques and employing data from the British Household
Panel Study for 1991 to 2002 this paper shows that not accommodating for
endogeneity in the labour market participation equation may significantly
overestimate the impact care exhibits on the employment decision of informal carers.
Moreover, it is shown that a negative impact on employment only applies to some
care-types. What are the policy implications? If informal care is a substitute for
formal care provided by social services and individuals have difficulties in finding
employment due to their caring responsibilities, increasing the formal care market
might enable these people to take up employment. If however informal care is a result
of not being able to find employment in the first place, any such policy will be
unsuccessful as the problem does not lie with the formal care market but with the
unemployability of the individual.


Labour Market and Caregiving



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