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At home versus in a nursing home: Long-term care settings and marginal utility

Author

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  • Achou, Bertrand
  • De Donder, Philippe
  • Glenzer, Franca
  • Lee, Minjoon
  • Leroux, Marie-Louise

Abstract

Marginal utility of spending when needing long-term care, and the related incentives for precautionary savings and insurance, may vary significantly by whether one receives care at home or in a nursing home. In this paper, we develop strategic survey questions to estimate those differences. All else equal, we find that the marginal utility of spending (net of the minimum cost of care) is significantly higher when receiving care at home rather than in a nursing home. Using an illustrative calibrated life-cycle model with these LTC-setting-specific preferences, we obtain that the higher marginal utility of spending under home care generates stronger precautionary savings incentives and a higher valuation of home care subsidies relative to nursing homes. Overall, our results suggest that shifts (e.g., due to Covid) leading to a stronger preference for home care could significantly increase savings as well as the benefits of allocating resources to long-term care.

Suggested Citation

  • Achou, Bertrand & De Donder, Philippe & Glenzer, Franca & Lee, Minjoon & Leroux, Marie-Louise, 2026. "At home versus in a nursing home: Long-term care settings and marginal utility," Journal of Economic Dynamics and Control, Elsevier, vol. 183(C).
    • Handle: RePEc:eee:dyncon:v:183:y:2026:i:c:s0165188925002209
    DOI: 10.1016/j.jedc.2025.105254
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    Keywords

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    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • I10 - Health, Education, and Welfare - - Health - - - General

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