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Informal, formal, or both? Assessing the drivers of home care utilization in Austria using a simultaneous decision framework

2018 Conference Presentation

Care models Austria

11 September 2018

Informal, formal, or both? Assessing the drivers of home care utilization in Austria using a simultaneous decision framework

Matthias Firgo, Austrian Institute of Economic Research (WIFO), Austria

Klaus Nowotny, University of Salzbug, Austria
Alexander Braun, WU Vienna University of Economics and Business, Austria


Background: A sound understanding of the factors determining the choice between formal and informal care is crucial for efficient policy making in "double aging" societies. A number of recent papers focused on the determinants of individual choice of and/or on the relation between different types of long-term care (LTC). Empirical results on the former typically highlight the importance of the individual state of health and family characteristics but the results tend to differ depending on the (set of) countries analyzed and on the econometric framework. Evidence on the latter has been highly inconclusive, with the results again depending on the econometric models employed and on the (groups of) countries analyzed. This stems from the fact that large differences in institutional design and in cultural aspects exist across the countries of Europe. These differences affect utilization rates of different types of LTC, the factors determining individual choice in LTC and to some extent also the substitutability between LTC modes.

Objectives: Against this background the purpose of this paper is twofold: First, we provide first comprehensive evidence on the drivers for the individual utilization of informal and/or formal home care and on the relation between these types of LTC in Austria. Second, we add to the scarce literature that explicitly models the determinants of LTC utilization in an econometric framework that goes beyond simple (multinomial) probit/logit models. With respect to the former purpose, the in total rather inconclusive previous results found in cross-country studies as well as in analyses for individual countries call for further country specific analyses to inform national and local policy makers about the actual determinants of LTC utilization in their country and given the country-specific institutional setting. With respect to the latter purpose, to the best of our knowledge, only Jimenez-Martin and Prieto (2012) have explicitly modeled the determinants for the combined use of formal and informal home care (FIHC) in addition to the general use of formal care (FHC) or informal care (FHC) in an econometric framework that addresses the simultaneous nature of care decisions as well as any interdependencies between IHC and FHC.

Methods: Using Austrian data from the Survey of Health, Ageing, and Retirement in Europe (SHARE), we estimate a bivariate probit model to account for the fact that utilizing FHC and IHC are separate but not independent decisions. We further consider a recursive (triangular) model assuming that IHC is endogenous and affects FHC, but that FHC has no effect on IHC. Our results identify the individual health status and limitations in the instrumental activities of daily living as the main drivers for choice of LTC modes.

Results: In line with recent papers on other EU-countries our results point towards a complementary rather than a substitutive relation between IHC and FHC.

Conclusion: Thus, policies successfully prioritizing home care over residential care to flatten the impending increases in public LTC expenditures have to acknowledge that the extension of FHC services has to be accompanied by policies increasing the incentives for family members and relatives to provide complementary IHC.