The proposed project will analyze how the market for long-term care will respond to the aging of populations. It will consider how biological forces, in terms of the stocks of frail and healthy persons in a population, interact with economic forces, in terms of the demand and supply for labor-intensive care. Several results have been obtained in preliminary theoretical analysis of the project. First, although many economists have argued that aging will raise demand for long-term care, and hence price and quantity through classic market effects, the direct effect of aging is to raise the supply of care. Second, aging may also have an indirect effect on the demand side which may reinforce or counteract this direct supply effect. The matching incentives determining home production as well as the covariance across cohorts between the stock of frail and the stock of healthy drives this indirect demand effect Third, growth of the male portion of the population is likely to contract to long-term care market because men are a minority in old-age matching a market as opposed to growth of publicly financed care through the effect that aging-induced price inflation has on gaining current preliminary level and to perform secondary data analysis to test the developed prediction. We plan to assess the predictions empirically using national, state, and county-level evidence on the US market for long-term care using nursing homes that last three decades to determine whether output growth of long-tenn care market has responded as predicted by the theoretical analysis. Preliminary analysis of a subpart of the data that is to be collected more fully suggest that long-tenn care output contracts with male aging as predicted.
