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Investing in care for old age? An examination of long-term care expenditure dynamics and its spillovers

Costa-Font, Joan ORCID: 0000-0001-7174-7919 and Vilaplana-Prieto, Cristina (2023) Investing in care for old age? An examination of long-term care expenditure dynamics and its spillovers. Empirical Economics, 64 (1). 1 - 30. ISSN 0377-7332

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Identification Number: 10.1007/s00181-022-02246-0


We study the dynamic drivers of expenditure on long-term care (LTC) programmes, and more specifically, the effects of labour market participation of traditional unpaid caregivers (women aged 40 and older) on LTC spending, alongside the spillover effects of a rise in LTC expenditure on health care expenditures (HCE) and the economy (per capita GDP). Our estimates draw from a panel of more than a decade worth of expenditure data from a sample of OECD countries. We use a panel vector auto-regressive (panel-VAR) system that considers the dynamics between the dependent variables. We find that LTC expenditure increases with the rise of the labour market participation of the traditional unpaid caregiver (women over 40 years of age), and that such expenditures rise exerts large spillover effects on health spending and the economy. We find that a 1% increase in female labour participation gives rise to a 1.48% increase in LTC expenditure and a 0.88% reduction in HCE. The effect of LTC spending over HCE is mainly driven by a reduction in inpatient and medicine expenditures, exhibiting large country heterogeneity. Finally, we document significant spillover effects of LTC expenditures on per capita GDP.

Item Type: Article
Official URL:
Additional Information: © 2022 The Authors
Divisions: Health Policy
Subjects: H Social Sciences > HC Economic History and Conditions
R Medicine > RA Public aspects of medicine
JEL classification: J - Labor and Demographic Economics > J1 - Demographic Economics > J10 - General
I - Health, Education, and Welfare > I1 - Health > I18 - Government Policy; Regulation; Public Health
Date Deposited: 31 Jan 2022 12:18
Last Modified: 26 May 2024 07:21

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