'Institutionalization Aversion' and the Willingness to Pay for Home Health Care
34 Pages Posted: 1 Dec 2017
Date Written: October 26, 2017
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: Suggested Citation