Does an increase in formal care affect informal care? Evidence among the French elderly

This paper investigates the causal impact of formal care use on informal care among formal care users. We propose an original instrument for formal care use, using local disparities in the price of formal care providers. Using the French survey CARE, we implement a two-part model to show the effect of formal care on the extensive and on the intensive margin of informal care. An exogenous increase in formal care is found to slightly decrease the probability to use informal care. Heterogeneity tests show this negative effect is mainly driven by caregiving for daily life activities, provided by women and secondary caregivers. At the intensive margin, however, informal care is not significantly affected by a formal care increase. Reforms extending the generosity of public policies for formal care use can thus be expected to have a limited effect on informal care use, concentrated on specific caregivers