The Hidden Value of Adult Informal Care in Europe

The hidden value of adult informal care (IC) refers to the unaccounted value of informal care in overall costs of long-term care (LTC) estimates. This paper estimates the net value of adult IC in Europe, drawing on a well-being-based methodology. We use an instrumental variable strategy and a longitudinal and cross-country dataset to estimate the causal effect of the extensive and intensive margin of caregiving on subjective well-being. We estimate the so-called compensating surplus (CS), namely the income equivalent transfer, to compensate for the net disutility of caregiving. We show that IC reduces average subjective well-being by about 1% compared to the mean (6% among co-residential caregivers). Relative to a country's Gross Domestic Product (GDP), the value of IC ranges between 4.2% in France and 0.85% in Germany. Such relative value declines as the country's share of formal LTC spending increases. These results call for a reconsideration of the existing classifications of LTC regimes. We estimate that the average CS per hour for IC is 9.55€, with a range from 22€ per hour in Switzerland to 5€ per hour in Spain. Additionally, we estimate that the long-term CS (estimated using an individual’s permanent income) tends to be lower than short-term CS (estimated using an individual’s current income).