Social interaction in an intergenerational model of informal care giving

We study jointly the health perception of the elderly and the care giving decision of their adult children. We set up a non cooperative game among altruistic family menbers where children allocate their time to work, leisure or care, while paremts can buy formal care on the market or commit to transfer a bequest. Social interactions play a crucial role: children make their care giving decisions strategically, meaning that each of them considers his/her siblings’ decision. We test whether informal care provision is driven by altruism or by bequest using SHARE, the Survey on Health, Aging and retirement. Such a survey contains information on health status of over-50 Europeans and details on their social and family relations. Its transnational feature allows to control for cultural and institutional differences. We estimate social interaction effects by means of methods taken from the spatial econometric literature, treating employment decisions as endogenous. The empirical evidence suggests that altruism dominates over bequest motives when individuals choose how much time to allocate to informal help to their parents.