"Institutionalization aversion" and the willingness to pay for home health care

We examine the presence of a systematic preference for independent living at old age which we refer as "institutionalization aversion" (IA). Given that IA is not observable from revealed preferences, we draw on a survey experiment to elicit individuals' willingness to pay (WTP) to avoid institutionalization (e.g., in a nursing home), using a single and double-bounded referendum WTP format. Our results suggest robust evidence of IA and reveal a willingness to pay of up to 16% of respondent's average income of individuals over fifty-five years of age. We find that the estimated willingness to pay to avoid institutionalization (292) exceeds the amount respondents are willing to pay for home health care at old age in the event of a mild impairment (222). WTP estimates vary with income, age and especially, respondents' housing conditions. Finally, we test the sensitivity of our estimates to anchoring effects and 'yea-saying' biases.