Abstract
Coping with activity limitations that occur in old age is an important issue in the context of increasing life expectancy and the, still, inevitable onset of chronic conditions in old age. Elderly households can be viewed as coping with activity limitations by producing functionality with the use of direct inputs that include home modifications. A model of the household production of functionality is developed within the general framework of household production function models of health. Hypotheses generated from this model are tested using a logit model for data from the Survey of Asset and Health Dynamics Among the Oldest Old (AHEAD). The main findings of the empirical analysis are that the demand for home modifications is fairly income-inelastic, home modifications and personal care are substitutes to some degree, the demand for home modifications increases with years of schooling, and that particular health conditions and the use of other assistive devices are important determinants of the demand for modifications.
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