Availability of Long‐term Care Facilities and Middle‐aged People's Labor Supply in Japan

• DOI: http://doi.org/10.1111/aepr.12163
• Published date: 01 January 2017
• Date: 01 January 2017
• Author: Ayako Kondo

Availability of Long-term Care Facilities and

Middle-aged People’s Labor Supply in Japan

Ayako KONDO†

The Universityof Tokyo

This paperestimates the effectof the availability of long-termcare facilitiesin the prefecture or medical

district where middle-aged men and women reside on their labor supply. Prefecture- and medical

district-level panel datasets of thecapacity of long-term carefacilities are merged withindividual level

employmentdata, and each individual’semployment status is regressedon the capacitiesof long-term

care facilities.I find no evidencefor a positive impact ofthe long-term care availabilityon labor supply,

although the estimates are unstable in sign and not estimated precisely enough to draw any strong

conclusions.

Key words: aging, caregiving, employment,labor supply, long-term care

JEL codes: J14, J22

1. Introduction

Japan’s workingage population is shrinking rapidly,whereas the elderly populationis likely

to keep increasing. To maintain the size of Japan’s laborforce, it is essential to increase the

labor supply of marriedwomen. Thus, the government of Japan has been tryingto remove

obstacles for women to continue working. One of such efforts is to reduce the number of

separations dueto caregiving for elderly. For example, under the slogan of“zero separation

due to caregivin g,”the government is planning to increase the supply of affordable long-

term care.

However, the evidence on whether the increased supply of long-term care actually

increases labor supply is scarce. Although many studies examine whether the caregiving

needs at the individual level affect labor supply (see Lilly et al. 2007 for a review of the

international literature), probably due to the difficulty in measuring the supply of formal

long-term care, there remains much to learn about the effect of the availability of formal

long-term care on caregivers’labor supply.

This paper aims to estimate the effect of the availability of long-term care facilities

in the local area on the labor supply of middle-aged men and women. To the best of

This research is supported by Japan Society for the Promotion of Science (JSPS) Grant in Aid for

Scientific Research (B) No. 15K17072 (PI: Ayako Kondo). The use of microdata was approved by

the Statistics Bureau of the Ministry of Internal Affairs and Communications and the Ministry of

Health, Labour andWelfare, based on this grant. I thank RyuichiTanaka and Emiko Usui for useful

comments on an earlier draft of thispaper. I also appreciate suggestions from the participants of the

AEPR conferenceand the Editors of the journal.

†Correspondence: AyakoKondo, Institute of Social Science,The University of Tokyo, 7-3-1, Hongo,

Bunkyo-ku, Tokyo, 113-0033 Japan.Email: akondo@iss.u-tokyo.ac.jp

doi: 10.1111/aepr.12163 Asian EconomicPolicy Review (2017) 12, 95–112

©2017 JapanCenter for EconomicResearch 95

bs_bs_banner

my knowledge, this is the first study in Japan that attempts to estimate the effect of

long-term care availability on labor supply directly. Specifically, I construct prefecture-

and medical district- level panel datasets of the capacity of long-term care facilities,

and merge them with individual level employment data using the prefecture or

municipality of residence and survey year. Then, I regress each individual’s employment

status on the capacities of long-term care facilities in the area where the individual

resides.

In Japan, three existing studies indirectly investigate the effect of increased formal

long-term care on female labor supply, exploiting the introduction of the long-term care

insurance in 2000. Shimizutani et al. (2008) examine the changes in the effect of a

caregiving dummy on the labor supply of women in the first few years after the

introduction of long-term care insurance. Their results are mixed: there was no significant

effect in the first year, but a large positive effect in the second year. Later, Sugawara and

Nakamura (2014) repeat a similar exercise using cross-sectional data covering a longer

time window, and find that the negative effect of a dummy for living with an elderly

person needing care on female labor supply is attenuating over time. They interpret this

finding as meaning that the introduction and expansion of long-term care insurance

made it feasible for family caregivers to continue working. In contrast, using panel data

on married couples Fukahori et al. (2015) find that the negative impact of caregiving

on labor supply for both men and women remains significant after the introduction of

the long-term care insurance system.

This paper departs from these existing studies in three important ways. First, as

already mentioned, the effect of an increase in the capacity of long-term care facilities

on labor supply is directly estimated. Second, by exploiting regional variation in the

supply of long-term care facilities, I control for nation-wide year effects. Since the existing

studies compare observations before and after 2000, any macroeconomic changes that

affect the labor supply of caregivers may be confounded with the effect of the

introduction of long-term care insurance. Third, this study covers men, as well as

women, and examines samples by marital status separately. Although single men are

more likely to live with an elderly person and, thus, face a greater risk of caregiving needs

than single women or married couples, they tend to have been ignored in the existing

studies.

I find no strong evidence of a positive impact of long-term care availability on middle-

aged men or women’s labor supply. Although there remain some reservations regarding

data quality and the estimates are unstable in sign and not estimated precisely enough to

draw any strong conclusions, the lack of any significant effect is consistent with the Usui

and Oshio’s (2016) findings that, after controlling for the endogeneous selection of

caregivers, thenegative effect of individual level care giving statuson labor supply becomes

insignificant. While the supply of long-term care services doubtlessly helps people who

struggleto reconcile work and caregiving,the impact on labor supply atthe macroeconomic

level seems to be limited.

The remainder of this paper is organized as follows. Section 2 provides a brief

description of the long-term care insurance system in Japan. Section 3 explains the

Long-termCare and Labor Supply Ayako Kondo

96 ©2017 JapanCenter for EconomicResearch