Abstract

Population aging is expected to result in increased demand for long-term care services world-wide. In Denmark, long-term care is predominately arranged by local municipalities and covered by public funds. Hence, an efficient allocation of resources is vital. Moreover, to ensure the survival of the welfare state model, it is necessary that there is a balance between public services offered on the one hand and the populations’ willingness to pay taxes to finance these services on the other. This paper uses a stated preference approach to study the willingness to pay for various components of long-term care services using household taxes as the payment vehicle. In our discrete choice experiment, respondents are asked to consider a hypothetical individual – an 83-year old woman with physical limitations who lives alone – and to choose between various municipal service packages for her. The service packages include four attributes: accommodation cleanliness, social activities, meal services and the possibility to buy additional services from the municipality. Each service package is connected to an increase in yearly household taxes. ‘Cheap talk’ (i.e. an explanation of hypothetical bias to respondents prior to presenting them with the choice sets) was employed to reduce the risk of respondents’ overstating their willingness to pay. The experiment was conducted in a population with oversampling of individuals above the age of 50. The results show that the greatest value is attached to social activities followed by meal services. The lowest value is attached to the possibility to buy additional help from the municipality. Willingness to pay varies by respondent characteristics. Generally, willingness to pay is positively associated with being female, being above the age of 50, being politically oriented towards the left and having a higher education. Moreover, people who define themselves as being acquainted with the long-term care service sector (either through current or previous employment, through own direct experience or through indirect experience via friends or family) have a higher willingness to pay for long-term care services. We conclude that willingness to pay for tax-financed long-term care services is highly connected to respondent characteristics.