Main Factors Determining the Economic Production Sustained by Public Long-Term Care Spending in Spain

Policy reforms of 2012 introduced in Spain a set of austerity measures to emerge from the 2008 global recession. However, attaining the sustainability of the long-term care (LTC) system by reducing public spending overlooks the drawbacks of a lower demand to meet dependency needs. In this context, this study is intended to provide a deeper insight into the economic factors affecting the shifts in the industrial output sustained by LTC spending before and after the austerity measures adopted in 2012. To accomplish this, we first apply a model based on the Input-Output methodology to quantify the output arisen from the consumption demand to meet the dependency needs covered by LTC spending in 2009, 2012 and 2015. Using the results of this model, we carry out a Structural Decomposition Analysis to explore the main drivers of change in the Spanish economic production for 2009-2012 and 2012-2015. The findings reveal that LTC demand factors have proven more relevant than technology factors in increasing production for the two periods considered. Such findings might guide political decision-making on the management of the LTC system in Spain, showing that public LTC spending does not merely contribute to the welfare of dependents, but also may boost economic production.