Estimating the Cost of Informal Care with a Novel Two-Stage Approach to Individual Synthetic Control

TL;DR

This paper introduces a novel two-stage individual synthetic control method to accurately estimate the significant income penalty faced by informal carers, revealing disparities by gender, ethnicity, and age.

Contribution

It presents the first robust causal estimation of the informal care income penalty using a new synthetic control approach that captures individual heterogeneity over time.

Findings

Average income penalty up to 45%

Monthly income decreases by {02}162 on average

Penalty peaks at {02}192 after 4 years

Abstract

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 often results in a significant income penalty for carers, a factor largely overlooked in the economics literature and policy discourse. Leveraging data from the UK Household Longitudinal Study, this paper provides the first robust causal estimates of the caring income penalty using a novel individual synthetic control based 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 {\pounds}162 in monthly income, peaking at {\pounds}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.