Get access

Crowding Out Informal Care? Evidence from a Field Experiment in Germany


  • The authors thank two anonymous referees as well as Monika Bütler, Stefan Felder and Michael Lechner for valuable comments. The article has also benefited from discussions at seminars of the University of Mannheim, the University of Magdeburg, the University of St. Gallen, the University of Göttingen, the annual meetings of the German Statistical Society, the Verein für Socialpolitik and the Meeting of the European Economic Association. This article is part of the project ‘Evaluating the use of direct payments in the long-term care of the elderly. A social experiment in the context of advancing the compulsory long-term care insurance according to §8 III SGB XI’ funded by the Association of Compulsory Health Insurers. The usual disclaimer applies. Stephan L. Thomsen thanks the Stifterverband für die Deutsche Wissenschaft (Claussen-Simon-Stiftung) for financial support.


This article evaluates the effects of a consumer-directed home care programme (Personal Budgets) compared with the standard home care programmes of the German long-term care insurance (LTCI). The evaluation makes use of a random assignment into a treatment group receiving personal budgets and a control group receiving either in-kind benefits (agency care) or cash payments. Compared with agency care, personal budgets extend the support by independent providers, but leave health outcomes unchanged. Compared with cash payments, personal budgets tend to improve health outcomes, but double LTCI spending due to a strong crowding out of informal care by formal care.