Housing liquidity and long-term care insurance demand: A quantitative evaluation

Bertrand Achou

Journal of Public Economics, 2021, vol. 194, issue C

Abstract: In theory, illiquid housing may substitute for long-term care insurance (LTCI) as retirees decumulate housing wealth mainly when moving to long-term care facilities. In this paper, I build and estimate a rich life-cycle model of single retirees in order to evaluate whether the impact of housing liquidity on LTCI demand is large. Overall, I find that the prospects of increasing LTCI demand by making housing more liquid are quite limited, as even large increases in housing liquidity generate modest increases in LTCI demand. I also find a limited impact of housing liquidity on the demand for life annuities. Finally, I show that the types of bequest motives used to rationalize the low take-up of reverse mortgages are generally inconsistent with the low demand for LTCI, suggesting that other factors may play a role in this low take-up of reverse mortgages.

Keywords: Long-term care; Insurance; Life-cycle; Housing; Liquidity; Retirement (search for similar items in EconPapers)
JEL-codes: D14 D15 E21 G11 I13 J14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:194:y:2021:i:c:s0047272720302176

DOI: 10.1016/j.jpubeco.2020.104353

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