A Note on the Choice between Formal and Informal Care for Elderly People

Given the social and financial implications associated with the expected growth in the demand for Long Term Care (LTC), there is a mounting interest in understanding the determinants of family decisions regarding living arrangements of the elderly, in order to implement effective policy measures aimed at containing costs and enhance the quality of care. This paper builds on the existing body of research in two ways. First, our paper extends to a different institutional setting a strand of literature where the large majority of studies relates to the United States, and whose results are not easily generaliseable to different systems. Second, we focus on an increasingly important issue, which is often disregarded in the literature: the role of paid caregiving when elderly people are assisted at home. In the traditional approach, informal and home care tend to coincide, disregarding the actual role of paid caregiving when the elderly person is assisted at home. Besides providing new empirical evidence that substantially improves the accuracy of available data concerning the Italian case, the main methodological contribution of the paper is that it explicitly considers the possibility for families to hire paid helpers in order to provide home care as a substitute for informal care or institutionalisation of the disabled elderly.