Title | Housing liquidity and long-term care insurance demand: A quantitative evaluation |
Publication Type | Journal Article |
Year of Publication | 2021 |
Authors | Achou, B |
Journal | Journal of Public Economics |
Volume | 194 |
Pagination | 104353 |
ISBN Number | 0047-2727 |
Keywords | Housing, Insurance, Life-cycle, Liquidity, Long-term Care, Retirement |
Abstract | In theory, illiquid housing may substitute for long-term care insurance (LTCI) as retirees decumulate housing wealth mainly when moving to long-term care facilities. In this paper, I build and estimate a rich life-cycle model of single retirees in order to evaluate whether the impact of housing liquidity on LTCI demand is large. Overall, I find that the prospects of increasing LTCI demand by making housing more liquid are quite limited, as even large increases in housing liquidity generate modest increases in LTCI demand. I also find a limited impact of housing liquidity on the demand for life annuities. Finally, I show that the types of bequest motives used to rationalize the low take-up of reverse mortgages are generally inconsistent with the low demand for LTCI, suggesting that other factors may play a role in this low take-up of reverse mortgages. |
DOI | 10.1016/j.jpubeco.2020.104353 |
Citation Key | 11407 |