Little is known about the price sensitivity of demand for home care of the disabled elderly. We partially fill this knowledge gap by using administrative data on the beneficiaries of the main French home care subsidy program in a department and exploiting interindividual variation in provider prices. We address the potential endogeneity of prices by taking advantage of the unequal spatial coverage of providers and instrumenting price by the number of municipalities served by a provider. We estimate a price elasticity of around -0.4 that is significantly different from both 0 and -1. This less than proportionate response of consumption to price has implications for the efficiency and redistributive impact of variation in the level of copayments in home care subsidy schemes.

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This paper investigates the causal effect of the amount of formal care used on the informal care received by formal care users. We use an original instrument for formal care volume based on local disparities (NUTS 3 level, 96 units) in the price of formal care. Using the French CARE survey, we use a two-part model to assess the effect of formal care on the extensive and the intensive margin of informal care. An increase in the amount of formal care is found to be associated with a small decrease in the probability of using informal care. Heterogeneity tests show that this negative effect is mainly driven by help for daily activities provided by women. At the intensive margin, informal care is not significantly affected by the amount of formal care. Reforms increasing subsidies for formal care can thus be suspected to have a limited effect on informal care arrangements.