Estimating Family Long-Term Care Decisions in the Presence of Endogenous Child Characteristics

Abstract

This paper estimates the effects of various parent and child characteristics on the choice of care arrangement of the parent taking into account the potential endogeneity of some of the child characteristics. This potential endogeneity is controlled for by using an instrumental variables approach with panel data. The procedure conditions on the parent receiving no significant care in the first year of the panel causing first year variables to be valid instruments for the second year variables. The estimation procedure shows that, after controlling for endogeneity, potentially endogenous child variables have smaller effects. The estimates predict moderate effects of parent sex, age, race, andrhealth and child sex and marital status, and large effects of parent marital status and child distance.