Long-Term Care, Formal Home Health Care, and Informal Care

David Byrne, Federal Reserve Board
Michelle Goeree, University of Amsterdam
Bridget Hiedemann, Seattle University
Steven Stern, University of Virginia

We use the 1993 wave of the AHEAD data set to estimate a game-theoretic model of families' decisions concerning time spent caring for elderly individuals and financial transfers for home health care. The outcome is a Nash equilibrium where each family jointly determines his or her consumption, transfers for formal care, and time allocation--informal care, market work, and leisure. The estimates allow us to decompose the effects of parent and child characteristics into wage effects, quality of care effects, and burden effects. They also allow us to simulate the effects of a broad range of policies of current interest.