Care for Elderly Parents: Do Children Cooperate?

Do children cooperate when they decide to provide informal care to their elderly parent? This paper assesses which model drives the caregiving decisions of children. I compare the predictive power of two models: a (joint-utility) cooperative and a Nash noncooperative model. I focus on families with two children and one single parent. The model allows caregiving by one child to have a direct externality on the well-being of the sibling. The results suggest that the cooperative model overestimates the level of care received by the parents observed in the data and its predictive power is outperformed by the noncooperative model. This suggests that children are more likely to behave according to a noncooperative model. I also find that children’s participation in caregiving has a positive externality on the well-being of the sibling. I construct an indicator of the degree of noncooperativeness between children and show that it is positively correlated with the number of unmet needs the parent has. I conclude that, because children do not internalize the positive externality when they behave noncooperatively, the current level of informal care provided to parents appears to suffer from a public good problem.