Formal versus Informal Care in Old Age: The Role for Social Ties

Abstract

I examine how social network members affect the use of formal care in old age. In doing so, I explore not only their provision of informal care, but also of other types of support, including information and peer effects. I use SHARE data for 11 European countries to analyse the use of professional help, hospitals, doctor visits, GPs and specialists. As a novelty, I use the newly available data on individual social network characteristics to account for the role of the extended family, as well as friends and neighbours in affecting formal care use after controlling for informal care provision. The characteristics I examine are social network size, composition (e.g. family vs. friends and neighbours), and homogeneity (in terms of both sex and age). My results confirm that children informal care is crucial in substituting formal care, and show how substitution changes when one considers informal care provided more generally, by anyone. More importantly, I find that the overall size and characteristics of one’s social network matter greatly in shaping his/her formal care use.

Keywords: health care, formal/informal provision, social networks, old age

JEL Classification: I110, J120, J140