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Dynamic Modelling of Long-Term Care Decisions

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  • Michelle Sovinsky

    ()
    (University of Zurich)

  • Steven Stern

    ()
    (University of Virginia)

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    Abstract

    This paper describes and analyzes research on the dynamics of long-term care and suggests directions for the literature to make progress. We discuss sources and causes of dynamics including inertia/state dependence (confounded by unobserved heterogeneity); match-speciÂ…c effects; and costs of changing caregivers. We comment on causes of dynamics including learning/human capital accumulation; burnout; and game playing. We suggest how to deal with endogenous geography; dynamics in discrete and continuous choices; and equilibrium issues (multiple equilibria, dynamic equilibria). Next, we evaluate the advantages of different potential data sources (NLTCS, PSID, AHEAD/HRS, SHARE, ELSA) and identify fiÂ…rst order data problems including noisy measures of wealth and family structure. We suggest some methods to handle econometric problems such as endogeneity (work, geography) and measurement error. Finally, we discuss potential policy implications of dynamics including the effect of dynamics on parameter estimates and direct policy implications of inertia (implications for family welfare, parent welfare, child welfare, and cost of government programs).

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Sovinsky_Stern_2012_dynamic_modeling_long-term_care.pdf
    File Function: First version, June, 2012
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    Bibliographic Info

    Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2012-019.

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    Date of creation: Jun 2012
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    Handle: RePEc:hka:wpaper:2012-019

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    Keywords: Long-Term Care; Dynamic Models;

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    1. Van Houtven, Courtney Harold & Norton, Edward C., 2004. "Informal care and health care use of older adults," Journal of Health Economics, Elsevier, vol. 23(6), pages 1159-1180, November.
    2. Norton, Edward C, 1995. "Elderly Assets, Medicaid Policy, and Spend-Down in Nursing Homes," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 41(3), pages 309-29, September.
    3. Roméo Fontaine & Agnès Gramain & Jér�me Wittwer, 2009. "Providing care for an elderly parent: interactions among siblings?," Health Economics, John Wiley & Sons, Ltd., vol. 18(9), pages 1011-1029.
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    6. Steven Stern & Bridget Hiedemann, 1999. "Strategic Play Among Family Members When Making Long-Term Care Decisions," Virginia Economics Online Papers 321, University of Virginia, Department of Economics.
    7. Meghan Skira, 2013. "Dynamic Wage and Employment Effects of Elder Parent Care," 2013 Meeting Papers 79, Society for Economic Dynamics.
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    16. Mroz, Thomas A., 1999. "Discrete factor approximations in simultaneous equation models: Estimating the impact of a dummy endogenous variable on a continuous outcome," Journal of Econometrics, Elsevier, vol. 92(2), pages 233-274, October.
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