Estimates of Price and Income Elasticities of At-home Care Demand in Japan: Evidence Based on a Contingent Valuation Method and Actual Demand(in Japanese)

Satoshi Shimizutani and Haruko Noguchi

ESRI Discussion paper series from Economic and Social Research Institute (ESRI)

Abstract: Due to rapid aging of the country's citizens, Japan faces an enormous long-term care future demand. To control care demand and maintain the current long-term care insurance, policies should be based on price and income elasticities obtained from empirical studies in Japan. This study is meant to provide valuable information that should be incorporated into actual policy-making; it aims to prevent a catastrophe due to explosion of care demand. In the paper we focus on estimating price and income elasticities of at-home care demand, which has been growing rapidly. To address these issues, this study adopts a contingent valuation method (CVM) and an estimate based on actual care demand, reflecting a unique micro-level survey data collected in 2001 and 2002 on households with a care-receiver. Our empirical results show the following.(1) According to our results based on the CVM, estimates on price elasticity of home-help services, day care / day services and short-stay services range from -0.2 to -0.4. On the contrary, estimates on income elasticity are insignificant in most cases.(2) The results based on actual care demand in the same sample show that price elasticity of home-help services is estimated to be -0.4, which is consistent with that obtained from the CVM. The magnitude of coefficients is also comparable with those in the CVM estimates, though they are not statistically significant. Estimates on income elasticities are not consistent with those in the CVM results. In sum, price elasticity of at-home care is estimated to be -0.2 to -0.4, which are reliable. On the contrary, the significance of income elasticity is ambiguous, but the magnitude is not large, despite its estimated significance in some cases. Those results demonstrate that price policy is extremely important in Japan's long-term care market; policy-makers should keep in mind those orders of price elasticity. Moreover, based on low income elasticity, policies should also address the demands of lower-income households.

Pages: 32 pages
Date: 2004-02
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