Investing in care for old age? An examination of long-term care expenditure dynamics and its spillovers

Joan Costa-Font and Cristina Vilaplana-Prieto

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study the dynamic drivers of expenditure on long-term care (LTC) programmes, and more specifically, the effects of labour market participation of traditional unpaid caregivers (women aged 40 and older) on LTC spending, alongside the spillover effects of a rise in LTC expenditure on health care expenditures (HCE) and the economy (per capita GDP). Our estimates draw from a panel of more than a decade worth of expenditure data from a sample of OECD countries. We use a panel vector auto-regressive (panel-VAR) system that considers the dynamics between the dependent variables. We find that LTC expenditure increases with the rise of the labour market participation of the traditional unpaid caregiver (women over 40 years of age), and that such expenditures rise exerts large spillover effects on health spending and the economy. We find that a 1% increase in female labour participation gives rise to a 1.48% increase in LTC expenditure and a 0.88% reduction in HCE. The effect of LTC spending over HCE is mainly driven by a reduction in inpatient and medicine expenditures, exhibiting large country heterogeneity. Finally, we document significant spillover effects of LTC expenditures on per capita GDP.

Keywords: long-term care spending; panel-VAR; dynamic panel data; female labour market participation; health spending; care spillovers (search for similar items in EconPapers)
JEL-codes: I18 J10 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2023-01-01
New Economics Papers: this item is included in nep-age, nep-dem and nep-hea
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Published in Empirical Economics, 1, January, 2023, 64(1), pp. 1 - 30. ISSN: 0377-7332

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Related works:
Journal Article: ‘Investing’ in care for old age? An examination of long-term care expenditure dynamics and its spillovers (2023)
Working Paper: 'Investing' in Care for Old Age? An Examination of Long-Term Care Expenditure Dynamics and Its Spillovers (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:113582

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