Income and the utilization of long-term care services

"The NBER Bulletin on Aging and Health provides summaries of publications like this. You can sign up to receive the NBER Bulletin on Aging and Health by email. This paper estimates the impact of income on the long-term care utilization of elderly Americans using a natural experiment that led otherwise similar retirees to receive significantly different Social Security payments based on their year of birth. Using data from 1993 and 1995 waves of the AHEAD, we estimate instrumental variables models and find that a positive permanent income shock lowers nursing home use but increases the utilization of paid home care services. We find some suggestive evidence that the effects are due to substitution of home care for nursing home utilization. The magnitude of these estimates suggests that moderate reductions in post-retirement income would significantly alter long-term utilization patterns among elderly individuals"--National Bureau of Economic Research web site.