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

Around 14% of the UK labour force has informal care responsibilities and almost everyone in society will be an informal carer in their lifetime. 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. Using an instrumental variable approach and panel data techniques and employing data from the British Household Panel Study from 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 caters. Moreover, it is shown that a negative impact on employment only applies to some care-types. Policy implications are derived. (C) 2006 Elsevier B.V. All rights reserved.