First-stage results.

In this study, we examine the relationship between formal care provision and informal care receipt from within the household for people over 75 years old using data from the British Household Panel Survey between 1991 and 2009. To address potential concerns about endogeneity of formal care we use a ‘spatial lag’ instrumental variable. We find a negative and statistically significant effect of formal care provision on informal care receipt from within the household, suggesting a substantial degree of substitutability between these two modes of care. These findings provide grounds for estimates of savings in the cost of informal care enabled by spending on formal care, which is important in light of the effects of the caregiving burden and associated responsibilities on carer’s labour market participation.