A panel multinomial logit analysis of elderly living arrangements: Evidence from aging in Manitoba longitudinal data, Canada

Utilizing a unique longitudinal survey linked with home care use data, this paper analyzes the determinants of elderly living arrangements in Manitoba, Canada using a random effects multinomial logit model that accounts for unobserved individual heterogeneity. Because current home ownership is potentially endogenous in a living arrangements choice model, we use prior home ownership as an instrument. We also use prior home care use as an instrument for home care and use a random coefficient framework to account for unobserved health status. After controlling for relevant socio-demographic factors and accounting for unobserved individual heterogeneity, we find that home care and home ownership reduce the probability of living in a nursing home. Consistent with previous studies, we find that age is a strong predictor of nursing home entry. We also find that married people, those who have lived longer in the same community, and those who are healthy are more likely to live independently and less likely to be institutionalized or to cohabit with individuals other than their spouse.