Trade-off between formal and informal care in Europe

Objective: This paper studies the relationship between formal and informal personal care for the dependent population in a number of European countries. Methodology: We use data from the Survey of Health, Ageing and Retirement in Europe for 2004 and estimates a bivariate probit model. Unlike other studies, not only takes into account demographic, health and environmental characteristics of the individual receiving care but also takes into account the institutional features of the various LTC systems. Results: In our analysis we found a significant correlation between the two decisions, which reveals that, conditional on care, there is some preference for the combination of both types of care. The detailed results show the importance of health variables and living arrangements for defining the combination of formal and informal care. There are important differences in the likelihood of both types of care between European countries stressing the importance of informal care in Spain compared with other countries. Conclusions: The design of long-term care policies must take into account that the probability of receiving formal or informal care increases more in countries where children have legal obligation to look after dependent people or with a higher rate of institutionalization. Therefore, the combination of different formal services more that the implementation of care allowances should be considered as a possible alternative to control public expenditure increase caregiver’s satisfaction.