Unpaid care provided by family members or friends remains the predominant form of support for older people in Europe. This column examines ways to measure the value of informal care and presents estimates using a wellbeing-based methodology. The findings suggest that the compensating surplus – the income equivalent required to offset the disutility experienced by informal caregivers – ranges from €5 per hour in Spain to €22 per hour in Switzerland, while the value as a percentage of GDP ranges from 0.85% in Germany to 4.2% in France. The relative value declines as the country’s share of formal long-term care spending increases.
In most European countries, informal care – unpaid care provided by family members or friends – remains the predominant form of support for older adults and one which responds strongly to even relatively small subsidies (Kedler and Barczyk 2018). While some policies offer financial assistance, training, and respite care to informal caregivers, they generally do not receive the same social protections as professional caregivers. As a result, the economic value of informal care is often hidden from official long-term care (LTC) cost estimates, leading to a systematic undervaluation of its contribution.
In a new study (Costa-Font and Vilaplana 2025), we aim to quantify the hidden economic value of informal caregiving in Europe by assessing both its total and per-hour value. Traditional financial approaches to valuing informal care are biasedbecause they fail to account for the indirect costs and welfare effects on caregivers. A more comprehensive approach should include not only the care recipients’ benefits but also the opportunity costs, stress, and emotional burden experienced by caregivers.
Methods for valuing informal care
The valuation of informal care requires assessing intangible costs such as fatigue, emotional strain, and the impact on caregivers’ work and social lives. A central challenge is quantifying the economic value of caregiving time, in particular distinguishing it from other household duties. The literature primarily employs two approaches: revealed preference methods and stated preference methods.
Revealed preference methods
These methods infer the cost of informal care by observing related market behaviours rather than directly eliciting individual preferences. There are two main approaches:
- The proxy good method estimates caregiving value based on the cost of hiring a professional caregiver. However, this approach may not reflect the true value of informal care, as market prices for professional care may not align with the personal sacrifices made by caregivers.
- The opportunity cost method values caregiving time based on the best alternative use of that time, such as paid work or leisure. While this method requires caregivers to distinguish between sacrificed activities, assigning an appropriate wage rate is challenging, especially for retirees or those outside the labour market.
Both methods provide incomplete estimates as they fail to capture caregivers’ and care recipients’ preferences fully.
Stated preference methods
These approaches directly elicit caregivers’ preferences by assessing hypothetical or actual caregiving scenarios. Key techniques include the following:
- The contingent valuation method (CVM) estimates caregivers’ willingness to forgo income in exchange for avoiding the burden of caregiving. While it captures indirect costs, it may lead to strategic responses or double counting of preferences.
- Conjoint analysis and discrete choice experiments (DCEs) present caregivers with hypothetical scenarios and require them to make trade-offs between different caregiving attributes. These methods mitigate strategic bias but can be cognitively demanding.
Wellbeing valuation method
The wellbeing approach assesses the total impact of informal care on caregivers’ subjective wellbeing (Van den Berg and Ferrer-i-Carbonell 2007). The estimated value of caregiving corresponds to the monetary compensation required to maintain caregivers’ wellbeing, defined as the ‘compensating surplus’, namely, the income equivalent required to offset the net disutility experienced by informal caregivers.
Advantages of this method include:
- high response rates and sensitivity to individual preferences;
- it avoids selection bias by not requiring prior identification of caregivers;
- it captures both tangible and intangible caregiving costs; and
- it considers potential beneficial effects of care provision to caregivers.
Evidence from several European countries
We estimate the compensating surplus in several European countries. Our methods rely on estimating the causal effect of care provision on subjective wellbeing using longitudinal and cross-country data and an instrumental variable strategy. WE estimate the causal effect of both the decision to provide care (extensive margin) and the intensity of care provided (intensive margin) on caregivers’ subjective wellbeing. Furthermore, our estimates of the compensating surplus use measures of current and permanent income
A key methodological approach we use is the subjective wellbeing method, which involves assessing the relationship between caregiving and life satisfaction while controlling for socioeconomic factors. This method allows us to estimate how much income would be needed to compensate caregivers for the burden they experience. The analysis reveals that engaging in informal caregiving reduces average subjective wellbeing by approximately 1% compared to the mean, with co-residential caregivers experiencing a more pronounced reduction of about 6%. This highlights the significant emotional and psychological toll associated with providing informal care, especially for those living with the care recipient.
As expected, the wellbeing loss is more severe among individuals who provide more than 20 hours of care per week, indicating that intensive caregiving leads to considerable stress, fatigue, and time constraints. Female caregivers, who constitute the majority of informal caregivers, report larger reductions in wellbeing, which may be attributed to gendered caregiving expectations and the additional burden of balancing caregiving with other responsibilities.
Economic valuation relative to GDP
We also estimate the economic value of informal care as a percentage of a country’s GDP. Findings indicate that this value ranges from 4.2% in France to 0.85% in Germany. Notably, countries with higher formal LTC expenditures tend to have a lower relative value of informal care, suggesting a substitution effect between formal and informal care provisions. These estimates provide policymakers with a clearer picture of the significant economic contribution made by informal caregivers. If informal caregiving were to be replaced by formal services, the fiscal cost would be substantial, placing additional strain on national healthcare budgets.
Cross-country differences in informal care provision
The reliance on informal caregiving varies across European countries, depending on the availability and affordability of formal care services, cultural norms, and social policies. In Mediterranean countries such as Spain, Italy, and Greece, informal care plays a dominant role due to cultural expectations and limited state-provided care. In contrast, Nordic countries, which have well-developed LTC systems, show a lower prevalence of intensive informal caregiving but still rely on family members for supplementary support. However, when we examine the relationship between individual compensating surplus per hour of informal care and per capita LTC expenditure we find three groups of countries: (1) low LTC expenditure and high compensating surplus (Spain) or moderate compensating surplus (Czech Republic, Italy); (2) intermediate LTC expenditure and compensating surplus (Austria and France); and (3) high LTC with low compensating surplus (Belgium, Denmark and Denmark) or intermediate compensating surplus (Sweden and Switzerland).
Cross-country estimates of the cost per hour of care
The average compensating surplus in PPP 2020 is of about €9.5hour for all caregivers, €22/hour for coresident caregivers, and €6.7/hour for non-coresident caregivers. As expected, the average compensating surplus is greater for men than for women, regardless of the type of caregiver. By country, the compensating surplus for caregivers ranges from €5/hour (Spain) to €22/hour (Switzerland), which also holds true for non-coresident caregivers.
Policy implications
Understanding the economic and social value of informal care is crucial in planning sustainable long-term care systems. While formal LTC systems are being expanded in many European countries, they remain insufficient to meet growing demand (Kotschy and Bloom 2022). Informal caregiving will continue to play a vital role, but without adequate recognition and support, caregivers may face worsening health and financial stability. As Europe grapples with ageing populations, striking a balance between formal and informal care provision will be paramount. A well-integrated LTC system that values both professional and informal caregivers is essential to ensure the sustainability of care and the well-being of both caregivers and recipients.
Source : VOXeu
