The Role of Informal Care in Modeling Ownership of Long-Term Care Insurance

Su Hyun Shin , University of Alabama
Dean R. Lillard, The Ohio State University

We explore whether a person is less likely to own long-term care (LTC) insurance when she expects children to supply informal care in the future. Using a two-stage approach, we find that a parent's expected supply of informal care increases when there is greater reciprocity in her relationship with her child, her child has a lower opportunity cost of time, and, as Becker's Rotten Kid Theorem predicts, when financial market shocks increase the value of her assets. Second-stage results confirm that ownership of LTC insurance falls as the expected supply of informal care increases.


 Presented in Session 74. Demography of Formal and Informal Care