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Pay less, consume more? Estimating the price elasticity of demand for home care services of the disabled elderly

Q. Roquebert and M. Tenand

Health, Econometrics and Data Group (HEDG) Working Papers from HEDG, c/o Department of Economics, University of York

Abstract: Although the consumption of home care is increasing with population ageing, little is known about its price sensitivity. This paper estimates the price elasticity of the demand for home care of the disabled elderly, using the French home care subsidy program ("APA"). We use an original dataset collected from a French District Council with administrative records of APA out-of-pocket payments and home care consumption. Identification primarily relies on inter-individual variations in producer prices. We use the unequal spatial distribution of producers to address the potential price endogeneity arising from non-random selection into a producer. Our results point to a price elasticity around -0.4: a 10% increase in the out-of-pocket price is predicted to lower consumption by 4%, or 37 minutes per month for the median consumer. Copayment rates thus matter for allocative and dynamic efficiencies, while the generosity of home care subsidies also entails redistributive effects.

Keywords: long-term care; price elasticity; public policy (search for similar items in EconPapers)
JEL-codes: C24 D12 I18 J14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-eur and nep-hea
Date: 2016-08
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