The opportunity costs of informal care giving can be measured in two ways. The first is the time forgone (Hassink and Bernard, 2011), namely:

(1)          H=b1C+b2X+u,

where H is the number of hours of paid work; C is the number of hours of informal care (or can be an indicator for whether providing care); X is the vector of control variables. b1 measures the opportunity cost, which is the average amount of time that could be devoted to work for each hour spent on giving care.

The other way to measure opportunity cost of care giving is forgone earnings, namely, the monetary value of informal care giving. It measures the monetary value that could be created from the production process and leisure without giving care (Berg, 2006). That is:

(2)       log(V)=b1C+b2X+u, 

where V is the monetary value. It can be predicted by forgone paid and unpaid work and leisure:

(3)      V=nw+hs+lt,  

where n is hours of foregone paid work, h is hours of foregone unpaid work, l is the hours of foregone leisure; w is wage of paid work, s is the shadow price of unpaid work, and t is the shadow price of leisure. Most of the literature only looks at paid work. If someone is unemployed, then his wage can be imputed by either his reservation wage or the actual wage of similar individuals.

(As an alternative to using opportunity cost, there is another way to measure the monetary value of care giving. It is called the proxy good method (Berg, 2006), which measures the value of the time spent on care giving of a close substitute. For example, the paid work by a professional caregiver.)

In practice, the predicted natural log of net (hourly) earnings can be generated by estimating standard Heckman selection corrected wage models by gender on the full sample of working-age individuals who are not in school (Stratton, 2012). Wages can be modeled as a function of age, education, region of residence, marital status and other community level and province level characteristics (such as unemployment rate).

To examine the casual effects of C in (1) and (2), a few studies have used the care needs as instrumental variables (e.g. see Ettner 1996). The main rationale for this is care need is correlated with hours of provided informal care, but it is not directly correlated with labor supply. Care needs can be measured by the health status (e.g. ADL and IADL, self-reported health) and marital status of the care recipients, the number of other caregivers (e.g. siblings), distance between the homes of caregivers and recipients.

In addition, there could be heterogeneity of opportunity costs for different types of care. They can be characterized in a number of ways. Common classifications are (Hassink and Berg, 2011):

  1. ‘household activities’ like cleaning and shopping;
  2. ‘instrumental activities of daily living’ like handling finances or administration;
  3. ‘activities of daily living’ like bathing or dressing or toileting;
  4. ‘surveillance’, like looking after the care recipient e.g. because this person cannot be left alone without involving safety risks;
  5. ‘medical related tasks’ like support with taking medicines or give injections.

Also they can be divided into co-resident care and nonresident care.


Van den Berg, B., Brouwer, W., van Exel, J., Koopmanschap, M., van den Bos, G. a M., & Rutten, F. (2006). Economic Valuation of Informal Care: Lessons from the Application of the Opportunity Costs and Proxy Good Methods. Social Science & Medicine, 62(4), 835–45. doi:10.1016/j.socscimed.2005.06.046.

Stratton, L. S. (2012). The Role of Preferences and Opportunity Costs in Determining the Time Allocated to Housework. The American Economic Review, 102(3), 606–611. Retrieved from

Hassink, W. H. J., & Van den Berg, B. (2011). Time-bound Opportunity Costs of Informal Care: Consequences for Access to Professional Care, Caregiver Support, and Labour Supply Estimates. Social Science & Medicine (1982), 73(10), 1508–16. doi:10.1016/j.socscimed.2011.08.027.

Ettner, S. L. (1996). The Opportunity Costs of Elder Care. Journal of Human Resources, 31(1), 189–205. Retrieved from