Formal Home Health Care, Informal Care, and Family Decision-Making

Abstract

We use the 1993 wave of the AHEAD data set to estimate a game-theoretic model of families' decisions concerning the provision of informal and formal care for elderly individuals. The outcome is a Nash equilibrium where each family member jointly determines his or her consumption, transfers for formal care, and allocation of time to informal care, market work, and leisure. We use the estimates to decompose the effects of child characteristics into wage effects, quality of care effects, and burden effects. We also simulate the effects of a broad range of policies of current interest.