'Institutionalization Aversion' and the Willingness to Pay for Home Health Care

34 Pages Posted: 1 Dec 2017

See all articles by Joan Costa-Font

Joan Costa-Font

London School of Economics & Political Science (LSE)

Date Written: October 26, 2017

Abstract

We examine the presence of a systematic preference for independent living at old age which we refer as “institutionalization aversion” (IA). Given that IA is not observable from revealed preferences, we draw on a survey experiment to elicit individuals’ willingness to pay (WTP) to avoid institutionalization (e.g., in a nursing home), using a double-bounded referendum WTP format. Our results suggest robust evidence of IA and reveal a willingness to pay of up to 16% of respondent’s (individuals over fifty-five years of age) average income. We find that estimates of the willingness to pay to avoid institutionalization (or €292 at the time of the study) exceed the amount respondents are willing to pay for home health care at old age in the event of a mild impairment (€222). WTP estimates vary with income, age and especially, respondents’ housing conditions. Finally, we test the sensitivity of our estimates to anchoring effects and ‘yea-saying’ biases.

Keywords: institutionalisation aversion, state-dependent preferences, home health care, willingness to pay, caregiving, referendum format

JEL Classification: R210, I180

Suggested Citation

Costa-Font, Joan, 'Institutionalization Aversion' and the Willingness to Pay for Home Health Care (October 26, 2017). CESifo Working Paper Series No. 6703. Available at SSRN: https://ssrn.com/abstract=3079445

Joan Costa-Font (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://https://joancostaifont.org/

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