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Do Local Governments Respond to (Perverse) Financial Incentives in Long-Term Care Funding Schemes?

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  • Øien Henning

    () (Department of Health Management and Health Economics, University of Oslo, Oslo, Norway)

Abstract

A highlighted issue in long-term care (LTC) financing is the presence of unfortunate incentives in financing schemes. For instance, in Norway, a high share of high-income recipients provides financial incentives to the local governments (the agencies in charge of the LTC system) to increase reliance on nursing home care relative to community housing and home-based care. This article examines the effects of the Norwegian LTC funding system on the composition of LTC services at the local government level. I use a cross-section from 2009 of 391 local governments to estimate a fractional probit model using quasi-maximum likelihood estimation. Controlling for need and geographical variations in care costs, I find that the share of “rich” elderly has a significant association with three measures of the volume of nursing home care relative to home-based care.

Suggested Citation

  • Øien Henning, 2013. "Do Local Governments Respond to (Perverse) Financial Incentives in Long-Term Care Funding Schemes?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 525-549, August.
  • Handle: RePEc:bpj:bejeap:v:14:y:2013:i:2:p:525-549:n:7
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    References listed on IDEAS

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    1. Rolf Aaberge & Audun Langørgen, 2006. "Measuring The Benefits From Public Services: The Effects Of Local Government Spending On The Distribution Of Income In Norway," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 52(1), pages 61-83, March.
    2. Aaberge, Rolf & Langorgen, Audun, 2003. "Fiscal and Spending Behavior of Local Governments: Identification of Price Effects When Prices Are Not Observed," Public Choice, Springer, vol. 117(1-2), pages 125-161, October.
    3. Papke, Leslie E. & Wooldridge, Jeffrey M., 2008. "Panel data methods for fractional response variables with an application to test pass rates," Journal of Econometrics, Elsevier, vol. 145(1-2), pages 121-133, July.
    4. Friedrich Breyer & Normann Lorenz & Thomas Niebel, 2015. "Health care expenditures and longevity: is there a Eubie Blake effect?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 16(1), pages 95-112, January.
    5. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-632, Nov.-Dec..
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