IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Public vs private demand for covering long term care expenditures

  • R. Brau


  • M. Lippi Bruni
  • AM. Pinna


This paper studies the determinants of the willingness to pay (WTP) for long term care (LTC) coverage provided through either a public or a private insurance program. Two insurance services are considered, a first one compulsory and financed out through general taxes, another one purchased on a voluntary base and paid through an insurance premium. Data are taken from a survey on a sample of households of the Italian region Emilia Romagna, and WTP is elicited through open-ended contingent valuation questions. We model individual choice as a two stage process, with respondents first establishing their interest for the service, then stating how much they are willing to pay. Auxiliary information allows us to separate zeros arising from standard corner solutions from those generated by disinterest. We test for independence of the interest” process by estimating Heckman’s sample selection models both for the public and private case. We show that two sequential processes guide the observed WTP and that their separate identification is crucial for a clear understanding of individual choices. Interest and WTP are influenced by different variables, whereas the same variables influence the two choices in different ways. Moreover, we are able to investigate the differences in stated WTP between public and private provision. The kind of information provided is useful for designing reforms that more closely match collective preferences in a particularly delicate area such as elderly care financing.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200408.

in new window

Date of creation: 2004
Date of revision:
Handle: RePEc:cns:cnscwp:200408
Contact details of provider: Postal: Via S. Giorgio 12, I-09124 Cagliari
Phone: +70/6756406
Fax: +70/6756402
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-19, December.
  2. Jones, Andrew M & Yen, Steven T, 2000. "A Box-Cox Double-Hurdle Model," Manchester School, University of Manchester, vol. 68(2), pages 203-21, March.
  3. Johannesson, Magnus & Johansson, Per-Olov, 1995. "Quality of Life and the WTP for an Increased Life Expectancy at an Advanced Age," SSE/EFI Working Paper Series in Economics and Finance 85, Stockholm School of Economics.
  4. Keen, Michael, 1986. "Zero Expenditures and the Estimation of Engel Curves," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(3), pages 277-86, July.
  5. Deaton, Angus & Irish, Margaret, 1984. "Statistical models for zero expenditures in household budgets," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 59-80.
  6. Eckerlund, Ingemar & Johannesson, Magnus & Johansson, Per-Olov & Tambour, Magnus & Zethraeus, Niklas, 1995. "Value for money? A contingent valuation study of the optimal size of the Swedish health care budget," Health Policy, Elsevier, vol. 34(2), pages 135-143, November.
  7. Ruth Hancock & Adelina Comas-Herrera & Raphael Wittenberg & Linda Pickard, 2003. "Who Will Pay for Long-Term Care in the UK? Projections Linking Macro- and Micro-Simulation Models," Fiscal Studies, Institute for Fiscal Studies, vol. 24(4), pages 387-426, December.
  8. Andrew M. Jones, 2012. "health econometrics," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
  9. Shackley, Phil & Donaldson, Cam, 2002. "Should we use willingness to pay to elicit community preferences for health care?: New evidence from using a 'marginal' approach," Journal of Health Economics, Elsevier, vol. 21(6), pages 971-991, November.
  10. Francis Vella, 1998. "Estimating Models with Sample Selection Bias: A Survey," Journal of Human Resources, University of Wisconsin Press, vol. 33(1), pages 127-169.
  11. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-44, September.
  12. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  13. Johannesson, Magnus & Johansson, Per-Olov & Söderqvist, Tore, 1997. "Time Spent on Waiting Lists for Medical Care: An Insurance Approach," SSE/EFI Working Paper Series in Economics and Finance 192, Stockholm School of Economics.
  14. Mellor, Jennifer M., 2001. "Long-term care and nursing home coverage: are adult children substitutes for insurance policies?," Journal of Health Economics, Elsevier, vol. 20(4), pages 527-547, July.
  15. Jones, Andrew M, 1992. "A Note on Computation of the Double-Hurdle Model with Dependence with an Application to Tobacco Expenditure," Bulletin of Economic Research, Wiley Blackwell, vol. 44(1), pages 67-74, January.
  16. Tim Besley & John Hall & Ian Preston, 1996. "The demand for private health insurance: do waiting lists matter?," IFS Working Papers W96/07, Institute for Fiscal Studies.
  17. Propper, Carol, 1993. "Constrained choice sets in the U.K. demand for private medical insurance," Journal of Public Economics, Elsevier, vol. 51(3), pages 287-307, July.
  18. Alan M. Garber, 1996. "To Comfort Always: The Prospects of Expanded Social Responsibility for Long-Term Care," NBER Chapters, in: Individual and Social Responsibility: Child Care, Education, Medical Care, and Long-Term Care in America, pages 143-172 National Bureau of Economic Research, Inc.
  19. Eul�lia Dalmau-Matarrodona, 2001. "Alternative approaches to obtain optimal bid values in contingent valuation studies and to model protest zeros. Estimating the determinants of individuals' willingness to pay for home care services in," Health Economics, John Wiley & Sons, Ltd., vol. 10(2), pages 101-118.
  20. Garcia, Jaume & Labeaga, Jose M, 1996. "Alternative Approaches to Modelling Zero Expenditure: An Application to Spanish Demand for Tobacco," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(3), pages 489-506, August.
  21. Kajal Lahiri & Jae G. Song, 2000. "The effect of smoking on health using a sequential self-selection model," Health Economics, John Wiley & Sons, Ltd., vol. 9(6), pages 491-511.
  22. Klose, Thomas, 1999. "The contingent valuation method in health care," Health Policy, Elsevier, vol. 47(2), pages 97-123, May.
  23. Alan Diener & Bernie O'Brien & Amiram Gafni, 1998. "Health care contingent valuation studies: a review and classification of the literature," Health Economics, John Wiley & Sons, Ltd., vol. 7(4), pages 313-326.
  24. Nick Hanley & Mandy Ryan & Robert Wright, 2003. "Estimating the monetary value of health care: lessons from environmental economics," Health Economics, John Wiley & Sons, Ltd., vol. 12(1), pages 3-16.
  25. Jones, Andrew M, 1989. "A Double-Hurdle Model of Cigarette Consumption," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 23-39, Jan.-Mar..
  26. Andrew M. Jones & José M. Labeaga, 2003. "Individual heterogeneity and censoring in panel data estimates of tobacco expenditure," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(2), pages 157-177.
  27. Bridget G. Hiedemann & Jutta M. Joesch, 2002. "The demand for nonrelative child care among families with infants and toddlers: A double-hurdle approach," Journal of Population Economics, Springer, vol. 15(3), pages 495-526.
  28. Leung, Siu Fai & Yu, Shihti, 1996. "On the choice between sample selection and two-part models," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 197-229.
  29. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
  30. Blundell, Richard & Meghir, Costas, 1987. "Bivariate alternatives to the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 179-200.
  31. Lindsay Brook & John Hall & Ian Preston, 1997. "What drives support for higher public spending?," IFS Working Papers W97/16, Institute for Fiscal Studies.
  32. David M. Cutler, 1993. "Why Doesn't the Market Fully Insure Long-Term Care?," NBER Working Papers 4301, National Bureau of Economic Research, Inc.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cns:cnscwp:200408. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Antonello Pau)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.