Abstract:

In the context of an unprecedented aging process, the role of domiciliary care for older adults is becoming increasingly essential. Designing effective and proactive policies of formal elderly-care is a major priority for the sustainability of the Long-term programmes in Europe. In this context, it is crucial to understand how vulnerable elderly individuals would adjust their informal long-term care utilization to changes in the formal-care provision. Although theoretical frameworks have been proposed, showing that a complementary relationship could arise when the elderly exhibit an excess demand of care, empirical evidence is scarce, due to the endogenous nature of formal-care decisions. We propose an instrumental variable approach with a novel instrument: a variable that capture individuals’ eligibility status to the LTC domiciliary programmes implemented in their own nation or region. That is, a dummy variable - being eligible or not - which has individual variation and which is grounded on the LTC regulation context at national or regional level. We are able to estimate an instrumented two-part model using waves 1 and 2 from SHARE, for non-institutionalised individuals in Austria, Germany, France and Belgium. Our results point at the lack of crowding-out of the informal- by the formal-care, thus suggesting the existence of a substantial unmet demand of LTC among the elderly, which is supplemented with a combination of both formal and informal assistance.