Do non-profit operators provide higher quality of care? Evidence from micro-level data for Japan's long-term care industry

Along with the introduction of the long-term care insurance scheme, the Japanese government in 2000 for the first time allowed for-profit operators to compete head-on with non-profit operators in the provision of at-home care services. This study examines quality differentials between the non-profit and the for-profit sector in Japan's elderly care industry, concentrating on home helpers and staff nurses. Taking advantage of a unique and rich micro-level survey, the study finds that although non-profit operators provide higher quality of care, as measured by simple averages of workers' characteristics, the advantage of non-profits disappears once their higher wage is corrected for. This finding confirms that the seemingly higher quality of care provided by non-profit operators is due to the non-profit wage premium, resulting from their preferential status which provides non-distributional constraints and favorable tax treatment.