Based on EU-SILC 2016 year data, this study analyses the effect of informal care obligations on labour market outcomes in the three Baltic States - Estonia, Latvia and Lithuania, measured by labor force participation, employment, and the number of hours worked. We also estimate wage penalties related to informal caregiving among the employed males and females. While in wealthier countries, where substitution effect of caring usually exceeds income effect (Carmicheal and Charles, 1998), informal caregivers are found to have less attachment to the labor force, we conclude that in poorer countries like Estonia, Latvia, and Lithuania the income effect is relatively strong and therefore informal caregiving, in particular co-residential, positively affects both male and female decision to join labour force. However, caring has negative effect on chances of employment (given labour force participation) and the supply of working hours. Wage penalties related to informal caregiving are found to be greater for females, who contrast to males relatively more often accept intensive care burden and are usually the main caregivers in their households. We discuss the gender-related differences and socio-economic consequences in the three countries analyzed. To address endogeneity of the informal care variables in the labour force, employment and wage equations, we apply instrumental variable method. The results obtained using ivreg2 Stata command proposed by Baum, Shaffer, and Stillman (2002) are coherent to those obtained after ivprobit and ivregress. To address the sample selection bias resulting from individual selection into the different labour market statuses we apply the Heckman correction (1976,1979).
Irina Mozhaeva is a researcher at the University of Latvia and an external consultant at OECD. She received her PhD in economics (subfield - economerics) from the University of Latvia. Her research and publications focus on long-term care, health economics, social policies, social inclusion, etc. She has participated in numerous World Bank and OECD projects in Latvia and Estonia, e.g. "Estonia: Long-term Care", "Active Ageing", "Developing a Health System Strategy for Priority Disease Areas in Latvia", "Connecting People with Jobs", "Investing in Youth: Latvia", "Latvia: Who is Unemployed, Inactive or Needy?", "Latvia Public Expenditure Review 2010", as well as in other national research projects.