Does Publicly Provided Home Care Substitute for Family Care? Experimental Evidence with Endogenous Living Arrangements

This paper analyzes the extent to which publicly provided formal (paid) home care substitutes for unpaid care provided informally by family and friends. Unlike most previous research, we recognize that the choice among alternative combinations of formal and informal care depends on the type of living arrangement chosen, and that these living arrangement choices in turn are influenced by the public provision of formal home care. Using data from a social experiment, we find that a generous public home care program significantly increases the probability that unmarried persons will live independently and reduces the probability of living in shared households or in nursing or personal care homes. However, any substitution effects-either direct effects on provision of informal care given living arrangement or indirect effects due to living arrangement changes-appear to be small.