The family as provider of long-term care: Efficiency, equity, and externalities

The passage of the baby-boom generation into old age raises the prospect of intense pressures on public programs benefiting the elderly, limiting any contemplated expansion of programs serving those needing sustained personal care. This necessitates consideration of comparative efficiency of alternative resources for elder care. I focus on two distinct aspects of such efficiency: productive - the relationship between inputs and outputs - and target - the coincidence of served and those viewed as needing services. I argue that for theoretical reasons family members, specifically children, may be more productive and efficient carers than paid helpers. Furthermore, even if no more efficient than formal providers, care provided by children reduces public expenditures on long-term care. In view of the value to society of children's caregiving activities, if a collective program of long-term care insurance were to be adopted, it should be configured to target its financing and benefits according to family composition.