Does informal care from children to their elderly parents substitute for formal care in Europe?☆
Introduction
Ageing of the population in most developed countries will undoubtedly have important effects on the demand for long-term care.1 The growing proportion of the elderly in the population is likely to increase substantially the demand for long-term care (Yang et al., 2003, Pezzin et al., 1996). As a percentage of GDP, long-term care expenditure is projected to increase by 168% in Germany, by 149% in Spain, and by 138% in Italy between 2000 and 2050 (Comas-Herrera et al., 2003). The evolution of long-term care expenditures depends on many factors, such as demographic trends or health, but also on the change in informal care over time. One suggested solution for slowing down the increase in long-term care expenditure is to encourage the development of informal care provided by the family to their frail, elderly family members. Indeed, family has always been a major source of care for frail older individuals and it is thought that informal care is less costly than more formal care arrangements. However, this solution is likely to lessen long-term care expenditure only if the informal care provided is an effective substitute for formal care.
In this paper, we assess the effect of a change in the provision of informal care by extra-resident children on the use of formal home care among the elderly using data from the Survey of Health, Ageing and Retirement in Europe (SHARE). We focus on two types of formal home care that are the most likely to interact with informal care: paid domestic help and nursing care. Paid domestic help consists of professional or paid home help in carrying out tasks such as doing work around the house or the garden or shopping for groceries. Nursing care is defined as nursing or personal care provided by professionals.
Many past studies analyzing the relationship between formal and informal care were concerned about of the effect of public support on informal care. Literature about this issue provides mixed results. Christianson (1988) shows that the increase in formal care that occurred due to the Channeling (a National long-term care demonstration that took place during the 1980s in US) had virtually no effect on the supply of informal care. Moreover, Langa et al. (2001) find a rather complementary relationship: the increase in home health care that took place during the 1990s in the United States mostly benefited individuals with a relatively high level of social support. Motel-Klingebiel et al. (2005) find no evidence of substantial ‘crowding out’ of family help using data from Norway, England, Germany, Spain, and Israel. By contrast, Ettner (1994) shows that Medicaid home care subsidies have increased the use of formal care and have reduced the amount of informal care among no-institutionalized persons regarding no medical care in the United States. Pezzin et al. (1996) also find a limited substitution between publicly provided home care and informal care. Instead of relieving informal caregivers, this public provision of care can result in more help being given to the elderly. Stabile et al. (2006) show that increased availability of publicly financed home care is associated with an increase in its utilization and a decline in informal care giving in Canada. Viitanen (2007) uses longitudinal data from 12 European countries (from the European Community Household Panel 1994–2001) and find that an increase in long-term care expenditure decreases informal caregiving undertaken outside the household.
By contrast, recent studies (Pezzin and Schone, 1999, Van Houtven and Norton, 2004, Van Houtven and Norton, 2008, Bolin et al., 2008) analyzing the relationship from the other point of view, i.e. the effect of informal care on the use of formal care, usually find that informal care substitutes for formal care, once controlling for endogeneity. Pezzin and Schone (1999) find a substitution relationship between paid home care when analyzing the informal care given by adult daughters to their elderly parents. Van Houtven and Norton (2004) obtain different results depending on the type of care granted. They find a net substitution for all types of care except for outpatient surgery. Bolin et al. (2008) have also examined the effect of informal care on the use of different types of formal and medical care among single-living elderly in Europe. They find that informal care substitutes for formal home care, while also being a complement to doctor and hospital visits.
In the present study, we extend the previous findings in different directions: first, we compare the effect of informal care on skilled (nursing care) and unskilled (paid domestic help) formal home care. This is in contrast with Bolin et al. (2008) and Van Houtven and Norton (2004), who consider the utilization of any formal home care without making such a distinction. We show that informal care has a different effect with respect to the home care being considered. Second, we analyze whether the relationship between formal and informal care differs according to the level of disability of the elderly person concerned. Our results suggest that the relationship between formal and informal care is sensitive to the needs of the elderly, represented by a constructed disability index.
Due to the sampling procedure of the first wave of SHARE, the analysis does not include elderly living in nursing home, which may represent a non-negligible proportion of formal care in several European countries, especially in Northern countries. This may potentially affect our results if the decision to institutionalize an older individual represents a substantial substitution of formal care for informal care (Pezzin et al., 1996). Moreover, elderly co-residing with their children are excluded from the analysis due to the difficulties in evaluating the existence, the direction, and the importance of the intra-household transfers taking place between co-residents (McGarry, 1999, Norton and Van Houtven, 2006). However, Section 6.2 analyzes the use of formal home care taking into account the effect of co-residence on the use of formal home care and show consistent results with the main analysis.
The remainder of this paper is organized as follows. The next section briefly discusses the conceptual framework and highlights the main issues raised in analyzing the relationship between formal and informal care. Section 3 explains the empirical model and discusses the econometric issues. Section 4 provides a description of the SHARE data and the variables used in the empirical model. Section 5 presents the estimation results and Section 6 checks those results by performing some sensitivity analyses regarding the set of instruments considered, and the inclusion of co-residence as another source of informal care by the adult children. Finally, Section 7 concludes.
Section snippets
Formal versus informal care
Theoretical models related to the utilization of formal and informal care among the elderly are mainly based on the family-decision making process and a health production function (Grossman, 1972, Van Houtven and Norton, 2004) or the ability by the elderly person to perform activities of daily living function (Stabile et al., 2006), using as inputs formal and informal care. According to these models, the relationship between informal and formal care depends therefore on the sign of the
Empirical model
The empirical model consists of analyzing the causal effect of informal care from adult children to their elderly parents on the utilization of formal home care. The analysis addresses the following issues: endogeneity, differential effects by types of formal home care and by level of disability of the elderly person.
Two types of formal home care are considered: nursing care and paid domestic help. We use a two-part model introduced by Duan et al. (1983), which allows the separation of behavior
Data
SHARE is a European multi-disciplinary survey including more than 30,000 persons aged 50 and over, and who come from 11 European countries ranging from Scandinavia to the Mediterranean, and Israel.3 We use in this paper release 2 of the first wave of the survey, which was
Estimation results
In this section, we present the estimation results for our model. We show both the estimation of the two-part model with regard to the provision of informal care as exogenous and the same model taking into account the possible endogeneity of this variable on the utilization of formal care. Moreover, we distinguish two types of formal home care: nursing care and paid domestic help. All equations include country-dummies in order to take into account the cross-country heterogeneity regarding the
The instruments
One crucial identification assumption of our model is that geographical proximity is independent to the error term of the formal care equation. However, children may live closer to their parents when the latter are in worse health, or they may choose to live nearer to their parents if the availability of formal care is scarce in the region where the parents live. In this case, geographical distance may not be a valid instrument for informal care in a model of formal care utilization. As a
Conclusion
This paper examines the effect of informal care from the children on the use of formal home care of the elderly in Europe. Using data from the first wave of SHARE (2004), we construct a two-part utilization model estimating the effects of informal care receipt from the children on the utilization of paid domestic help and nursing/personal care among the >65 individuals in nine European countries. The model takes into account the potential endogenous relationship between formal and informal care
Acknowledgements
I am especially grateful to Izabela Jelovac and Claire Maréchal for helpful discussions. Moreover, I wish to thank Sergio Perelman, Pierre Pestieau, Courtney Van Houtven, Arthur Van Soest, Jérôme Wittwer and two anonymous referees for their precious comments and suggestions. I also thank the participants of the SHARE-I3 and COMPARE Midterm Meeting (Chania, Greece), the Netspar seminar (Tilburg University, the Netherlands), the ARC Meeting (University of Liège, Belgium) and the XXII European
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This paper uses data from release 2 of SHARE 2004. The SHARE data collection was primarily funded by the European Commission through the 5th framework program (project QLK6-CT-2001-00360 in the thematic program Quality of Life). Additional funding came from the US National Institute on Ageing (U01 AG09740-13S2, P01 AG005842, P01 AG08291, P30 AG12815, Y1-AG-4553-01 and OGHA 04-064). Data collection in Austria (through the Austrian Science Foundation, FWF), Belgium (through the Belgian Science Policy Office) and Switzerland (through BBW/OFES/UFES) was nationally funded. The SHARE data collection in Israel was funded by the US National Institute on Aging (R21 AG025169), by the German-Israeli Foundation for Scientific Research and Development (G.I.F.), and by the National Insurance Institute of Israel. Further support by the European Commission through the 6th framework program (projects SHARE-I3, RII-CT-2006-062193, and COMPARE, CIT5-CT-2005-028857) is gratefully acknowledged. For methodological details see Börsch-Supan and Jürges (2005).