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Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents

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  • Liliana E. Pezzin
  • Robert A. Pollak
  • Barbara S. Schone

Abstract

In this article, we use a two-stage bargaining model to analyze the living arrangement of a disabled elderly parent and the assistance provided to the parent by her adult children. The first stage determines the living arrangement: the parent can live in a nursing home, live alone in the community, or live with any child who has invited coresidence. The second stage determines the assistance provided by each child in the family. Working by backward induction, we first calculate the level of assistance that each child would provide to the parent in each possible living arrangement. Using these calculations, we then analyze the living arrangement that would emerge from the first stage game. A key assumption of our model is that family members cannot or will not make binding agreements at the first stage regarding transfers at the second stage. Because coresidence is likely to reduce the bargaining power of the coresident child relative to her siblings, coresidence may fail to emerge as the equilibrium living arrangement even when it is Pareto efficient. That is, the outcome of the two-stage game need not be Pareto efficient. (JEL classification: D1, J1, J2) Copyright 2007, Oxford University Press.

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Bibliographic Info

Article provided by CESifo in its journal CESifo Economic Studies.

Volume (Year): 53 (2007)
Issue (Month): 1 (March)
Pages: 69-96

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Handle: RePEc:oup:cesifo:v:53:y:2007:i:1:p:69-96

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Citations

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Cited by:
  1. Fontaine, Roméo & Gramain, Agnès & Wittwer, Jérôme, 2009. "Providing Care for an Elderly Parent: Interactions Among Siblings ?," Economics Papers from University Paris Dauphine 123456789/1879, Paris Dauphine University.
  2. Roméo Fontaine & Agnès Gramain & Jér�me Wittwer, 2009. "Providing care for an elderly parent: interactions among siblings?," Health Economics, John Wiley & Sons, Ltd., vol. 18(9), pages 1011-1029.
  3. Haizhen Mou & Stanley L. Winer, 2012. "Fiscal Incidence when both Individual Welfare and Family Structure Matter: The Case of Subsidization of Home-Care for the Elderly," CESifo Working Paper Series 3731, CESifo Group Munich.
  4. M. Lippi Bruni & C. Ugolini, 2013. "Delegating home care for the elderly to external caregivers? An empirical study on Italian data," Working Papers wp905, Dipartimento Scienze Economiche, Universita' di Bologna.
  5. Bell, David & Rutherford, Alasdair, 2012. "Long-Term Care and the Housing Market," Stirling Economics Discussion Papers 2012-13, University of Stirling, Division of Economics.
  6. Meliyanni Johar & Shiko Maruyama, 2012. "Externality and Strategic Interaction in the Location Choice of Siblings under Altruism toward Parents," Discussion Papers 2012-15, School of Economics, The University of New South Wales.
  7. Jie Pan & Gary Wagner, 2011. "The Effect of State Tax Preferences on the Living Arrangements of Elderly Individuals," International Advances in Economic Research, Springer, vol. 17(2), pages 193-210, May.
  8. Liliana E. Pezzin & Robert A. Pollak & Barbara S. Schone, 2008. "Long-Term Care of the Disabled Elderly: Do Children Increase Caregiving by Spouses?," NBER Working Papers 14328, National Bureau of Economic Research, Inc.
  9. Pollak, Robert, 2007. "Family Bargaining and Taxes: A Prolegomenon to the Analysis of Joint Taxation," IZA Discussion Papers 3109, Institute for the Study of Labor (IZA).
  10. Guodong Chen & Xiaoyan Lei, 2009. "“Fertility effect” or “supporting effect?”—Quantity of children and parental health," Frontiers of Economics in China, Springer, vol. 4(4), pages 601-616, December.
  11. Shelly Lundberg & Robert A. Pollak, 2007. "The American Family and Family Economics," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 3-26, Spring.
  12. Christine Ho, 2013. "Grandchild Care, Intergenerational Transfers, and Grandparents’ Labor Supply," Working Papers 06-2013, Singapore Management University, School of Economics.
  13. Orsini, Chiara, 2010. "Changing the way the elderly live: Evidence from the home health care market in the United States," Journal of Public Economics, Elsevier, vol. 94(1-2), pages 142-152, February.
  14. Robert A. Pollak, 2011. "Allocating Time: Individuals' Technologies, Household Technology, Perfect Substitutes, and Specialization," NBER Working Papers 17529, National Bureau of Economic Research, Inc.
  15. Edward C. Norton & Lauren Hersch Nicholas & Sean Sheng-Hsiu Huang, 2013. "Informal Care and Inter-vivos Transfers: Results from the National Longitudinal Survey of Mature Women," NBER Working Papers 18948, National Bureau of Economic Research, Inc.

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