Long-Term Care and Intergenerational Resource Allocation

Washington University, Saint Louis MO

Investigators

Linked publications & trials

Abstract

DESCRIPTION (provided by applicant): Concerns about the potential erosion of the family as a support network have prompted a variety of public policy proposals designed to influence the dynamics of family support. A better understanding of the process by which families come to assume and share the responsibility of caring for their disabled elderly members is essential for designing and evaluating long-term care policies. Our first aim in this study is to develop a dynamic, game-theoretical model of intergenerational family decision making that accounts for interactions among family members. Using a sequential three-stage game, we examine living arrangements choices (the disabled elderly parent lives independently in the community, in a nursing home, or resides with one of her children), children's transfers of time and cash to the parent, intervivos transfers from the parent to each child, and parental use of formal care. Our framework explicitly accounts for the presence of multiple players and the role of government in providing untied (e.g., Social Security) and tied (e.g., Medicare) transfers to elderly persons and their caregivers. Our second aims is to test two key implications of the model: (i) The relative bargaining power of an adult child who coresides with her disabled parent will be reduced relative to non-coresident siblings and (ii) family living arrangement decisions will be influenced by expected transfers by all children and policy variables, including the form (in-kind versus cash), targeting (elderly persons verus caregiver), and generosity of government programs. These implications will be tested empirically by using difference-in-difference techniques (relative bargaining power hypothesis) and a simultaneous, multi-equation, endogenous switching model (expected transfer hypothesis). The empirical work will take advantage of panel data available for a nationally representative sample of elderly parents and their adult children (Assets and Health Dynamics of the Elderly/Health and Retirement Survey). Results from these analyses will provide important insights into the efficiency of intergenerational living and care arrangements and the distributional effects of alternative government long-term care policies.