Quality and efficiency of home help elderly care in Japan: Evidence from micro-level data

With the introduction of public long-term care insurance in the spring of 2000, for-profit enterprises were allowed to enter the home help elderly care market in Japan for the first time. We take advantage of data from a unique, self-conducted survey to compare the efficiency and quality of service offered by providers with different types of ownership and different lengths of operation. We present two major findings. First, contrary to the prevailing perception, we find no significant difference in the quality of service between for-profit and nonprofit providers. Although the nonprofits are able to offer more qualified and experienced staff, the quality of services provided by nonprofits is worse in some aspects than that of their for-profit counterparts. Second, our estimates of a quality-adjusted cost function demonstrate that the management of newer providers is more efficient than that of older providers. Our results show that the competition mechanism works effectively in the home help care market, and that there is no reason to believe that the for-profit providers are behaving opportunistically. Thus, this study justifies the belief that free-market policy contributes significantly toward improving the quality and the efficiency of home help long-term care in Japan. J. Japanese Int. Economies 21 (2) (2007) 287-301.