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Who Cares for the Elderly? Intrafamily Resource Allocation and Migration in Mexico

Jan 2007
Working Paper
06-031
By  Francisca Antman
Children are sometimes viewed as a method of insuring against disability and providing income after retirement, especially in developing countries with limited markets for credit and insurance. But how do children decide on how much care to provide to their parents in old age, particularly in families with many children? This paper takes a non-cooperative view of family decision-making and estimates best response functions for individual physical and financial contributions as a function of siblings' contributions. I account for the endogeneity of siblings' contributions by using siblings' characteristics as instrumental variables. By estimating these decisions as part of a two-stage game that includes a migration decision, I also consider the impact of migration on elderly care. I find evidence that children's financial contributions function as strategic complements while their time contributions operate as strategic substitutes, suggesting that giving may be based on both strategic bequest and public good motivations. Despite these findings, evidence from a simulation generating an exogenous switch in child's migrant status shows a likely decrease in time and financial contributions for most elderly parents.