Health care and social care: complements, substitutes and attributes

Ageing populations are a major challenge for most developed countries, where social security systems were developed in the post war period. It has been suggested that the costs of caring for the ageing population places a considerable strain on individuals, as well as on the public purse, and many countries are looking for ways to reduce costs. One of the major issues is the relationship between health care and social care. This paper considers health care and social care as complements and substitutes through a household production framework. We demonstrate how health care and social care are attributes that are valued by individuals and how in the presence of a perfect market individuals would choose combinations of these attributes. We highlight how, even with technical efficiency, sub-optimal combinations of health and social care may be chosen. We also show, through the introduction of a new good, how there may be opportunities to alleviate the costs of the ageing population.