Long-term care expenditures and investment decisions under uncertainty

Pablo Garcia Sanchez, Luca Marchiori () and Olivier Pierrard

Journal of Population Economics, 2025, vol. 38, issue 1, No 4, 23 pages

Abstract: Abstract Long-term care (LTC) expenditures for the elderly are high in developed countries and are expected to increase further as the population ages. Additionally, LTC costs vary significantly across individuals and are unknown early in life. In this paper, we introduce uncertainty regarding the timing of future LTC costs into a life-cycle model with endogenous aging. We then analyze how this uncertainty impacts the optimal behavior of agents. Our findings demonstrate that uncertainty reduces health investment during youth and diminishes the effectiveness of health investment subsidies. These results suggest that uncertainty should be carefully considered in models that examine the positive or normative aspects of health investment.

Keywords: Health; Long-term care costs; Uncertainty; Stochastic model (search for similar items in EconPapers)
JEL-codes: C60 D15 D81 I12 I18 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Long-term care expenditures and investment decisions under uncertainty (2023)
Working Paper: Long-term care expenditures and investment decisions under uncertainty (2023)
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DOI: 10.1007/s00148-025-01075-6

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