Estimating the Cost of Informal Care: A novel two-stage approach to individual synthetic control

Maria Petrillo, University of Sheffield
Daniel Valdenegro Ibarra, University of Oxford
Charles Rahal, University of Oxford
Yanan Zhang, University of Oxford
Gwilym Pryce, University of Sheffield
Matthew Bennett, University of Birmingham

Informal carers provide the majority of care for people living with challenges related to older age, long-term illness, or disability. However, the care they provide carries a potentially significant income penalty for caregivers, a factor that is largely overlooked in both the economics literature and in policy discourse. Leveraging data from the UK Household Longitudinal Study, this paper provides the first robust causal estimates of the caregiving income penalty using a novel individual synthetic control method that accounts for unit-level heterogeneity in post-treatment trajectories over time. Our baseline estimates identify an average relative income gap of up to 45%, with an average decrease of £162 in monthly income, peaking at £192 per month after 4 years, based on the difference between informal carers providing the highest-intensity of care and their synthetic counterparts. We find that the income penalty is more pronounced for women than for men, and varies by ethnicity and age.

Keywords: Inequality, Disadvantage and Discrimination, Data and Methods, Longitudinal studies

See paper.