TIME? MONEY? BOTH? THE ALLOCATION OF RESOURCES TO OLDER PARENTS· KENNETH A. COUCH, MARY C. DALY,AND DOUGLAS A. WOLF Weprovide estimates of a reduced-form model of the allocation of household time and money resources. We consider four demands for these resources: time spent working, time spent providing care for noncoresident elderly parents, time spent performing house- work, and monetary transfers to noncoresident elderly parents. We focus on the effects of wage rates and parental characteristics on the allocation decisions of adult children and their households con- cerning these four demands. Wefind that households with individu- als earning high wages rely relatively more on cash transfers and relatively less on time transfers than do lower-wage households. We also find evidence consistent with an unmeasured tendency of some families to provide multiple sources ofsupport. A s the baby boom generation reaches age 65 early in the next century, the number and percentage of older persons in the United States will begin to increase dramatically. Census Bureau projections indicate that between 1997 and 2050, the population aged 65 or older will grow both in absolute terms, by over 230%, and in relative terms, from 12.7% to 20% of the total population (U.S. Bureau of the Census 1997). More- over, this cohort of older individuals is projected to have an average life expectancy of more than 80 years (Lee and Carter 1992). Although there is some debate about whether increased life expectancy extends the number of years that older individuals will live in poor health, there is general agreement that increasing life expectancy increases the risk that older individuals will need financial or time assistance to continue living independently. Adult children currently provide a large percentage of the time and private financial transfers received by their parents (Morgan 1984; Special Committee on Aging 1988; Stone, Cafferata, and Sangl 1987). Thus, as the proportion of older individuals grows and life expectancy is extended, the potential demands upon the resources of younger house- holds are likely to increase. To understand the impact that these changing demographic patterns may have on family resource allocation, we examine how families presently ad- just their time and money allocations to meet the needs of noncoresident elderly parents. 'Address correspondence to Douglas A. Wolf, Center for Policy Re- search, Syracuse University, 426 Eggers Hall, Syracuse, NY 13244; E-mail: dwolf@maxwell.syr.edu. Kenneth A. Couch, Department of Economics, University of Connecticut. Mary C. Daly, Federal Reserve Bank of San Francisco. This research was supported in part by NIA Postdoctoral Fellow- ships received by Kenneth Couch (Grant No. T32 AG00238) and Mary Daly (Grant No. F32 AG05642). Useful comments have been received from Daniel Hill, George Jakubson, Jan Ondrich, Peter Barth, Stephen Miller, the editor, and three anonymous referees. Demography, Volume 36-Number 2, May 1999: 219-232 We investigate a model of family decision making in which time spent in the labor market, in housework, and im- plicitly in leisure, as well as the amount of time and money allocated to parents, are jointly determined. Although exten- sive research exists on each of these topics, individually or in pairs, no study has examined the joint determination of all four allocation decisions. Of primary interest in our analysis are the effects of wage rates-representing the value of time-and the effects of parental characteristics-represent- ing variations in potential claims on their children's re- sources--on the resource-allocation decisions of households. BACKGROUND Intergenerational Transfers and Family Allocation Decisions Much of the considerable attention devoted to the issue of intergenerational transfers in recent years has been directed at understanding alternative motivations for transfers be- tween parents and their children (for a comprehensive re- view see Soldo and Hill 1993) rather than at documenting the adjustments that families make when demands from parents arise. Still, concern that the competing demands of caring for young children and elderly parents are straining the resources of working-age families has prompted several empirical studies on the relationship between elder care and labor market work. The results from these studies have been mixed. Several cross-sectional studies have investi- gated the effect of caregiving on employment (Boaz and Muller 1992; Muurinen 1986; Stone and Short 1990), of employment on caregiving (Spitze and Logan 1991), or of both relationships simultaneously (McLanahan and Monson 1990; Ruhm 1996); but these studies have failed to con- sider the potential endogeneity problems arising in analyses of two theoretically competing uses of time. Some cross- sectional studies have addressed these endogeneity prob- lems: Stem (1995) and Ettner (1995, 1996) found that pro- viding parent care reduced women's hours of employment, whereas Wolf and Soldo (1994) found no evidence that pro- viding parent care reduced married women's employment or hours of work. Recently, several studies of the reciprocal relationships between caregiving and paid employment, based on longitu- dinal data, have appeared (Moen, Robison, and Fields 1994; Pavalko and Artis 1997; Robison, Moen, and Dempster- McClain 1995). All of these studies failed to demonstrate that being a caregiver reduces the rate of movement into employ- 219 Downloaded from http://read.dukeupress.edu/demography/article-pdf/36/2/219/886581/219couch.pdf by guest on 05 November 2021