The Production of Functionality by the Elderly: A Household Production Function Approach

Abstract

This paper extends Becker's model of the household production function of human capital to the production of elderly functionality. In our model, elderly functionality is produced with the direct inputs of assistive devices, personal assistance, and nutritional intake. Education, endowment variables (like genetic endowment and sex) and health conditions (like stroke) determine the production function environment. Data from the Survey of Asset and Health Dynamics Among the Oldest-Old (AHEAD) are used to estimate a production function of bathing functionality, using a two-stage estimation procedure. In the first stage, input demands for the endogenous functionality inputs are estimated, recognizing health heterogeneity. Our results suggest that reverses in functionality caused by age and heath conditions can be partially compensated for by the use of assistive devices (like grab bars and bathing equipment), secure nutritional intake and moderate alcohol consumption, even though non-inputs like chronic health conditions, age, sex and genetic endowment very strongly determine the level of functionality.