Abstract

This paper explores whether, and how, information learned through informal care provision within the family, impacts individual expectations for the future.

We examine four different outcomes. Two outcomes measure expectations for future care needs: future nursing home use and children providing informal care; two outcome measure changes to one’s financial future, expectations for receiving inheritances and buying long-term care insurance. By exploiting the relationship between care recipient and care provider, we try to disentangle the difference between the expectations for future health declines and how one prefers to cope with these health declines.

We find that experience – providing informal care oneself – and genetic information – having a biologically related parent receive care – work in opposite directions on the expectations for future nursing home use. Experience providing care leads individuals to increase their expectation for formal care, while informal care provision within the family decreases expectations. We also find that providing care to one’s own parent significantly increases one’s perceptions about the likelihood of their own children providing care. This is consistent with the “demonstration effect.”

We then examine if caregiving impacts the decision to purchase long-term care insurance and change the financial burden of future long-term care. We find that there is not an independent impact of caregiving on insurance purchases. This could, in part, be due to increased expectations about inheritance receipt. We test the robustness of our findings to see if expectations are improved and find that households that have informal care provision to a parent are the most accurate at accessing their future formal longterm care needs. We do find some evidence of over-reaction of individual expectations based on recent events for those whose in-laws require informal care.

Slides