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Externality and Strategic Interaction in the Location Choice of Siblings under Altruism toward Parents

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  • Meliyanni Johar

    ()
    (Economics Discipline Group and Centre for the Study of Choice, Business School, University of Technology Sydney)

  • Shiko Maruyama

    ()
    (School of Economics and ARC Centre of Excellence in Population Ageing Research, Australian School of Business, University of New South Wales)

Abstract

When siblings wish for the wellbeing of their elderly parents, the cost of care giving and long-term commitment creates a free-rider problem among siblings. We estimate a sequential game to investigate externality and strategic interaction among adult siblings regarding their location choice relative to their elderly parents. Using the US Health and Retirement Survey, we find a positive externality and strategic interaction. The first-mover advantage of eldest children and the prisoner's dilemma are likely to exist but their magnitudes are negligible compared with inefficiency in joint utility. Inefficiency is large in a family with an educated, widowed mother and with educated siblings who are younger (relative to parents), married, and similar to each other. Had siblings fully internalized externality and jointly maximized utility sum in 2010, 17% more parents with multiple children would have had a child nearby. Public policies that reduce children's private costs may enhance social welfare.

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File URL: http://cepar.edu.au/media/62142/01_externality_and_strategic_interaction_in_the_location.pdf
File Function: First version, 2012
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Bibliographic Info

Paper provided by ARC Centre of Excellence in Population Ageing Research (CEPAR), Australian School of Business, University of New South Wales in its series Working Papers with number 201201.

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Length: 60 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:asb:wpaper:201201

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  1. Tennille J. Checkovich & Steven Stern, 2002. "Shared Caregiving Responsibilities of Adult Siblings with Elderly Parents," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 441-478.
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  5. Meliyanni Johar & Shiko Maruyama, 2010. "Intergenerational Cohabitation in Modern Indonesia: Filial Support and Dependence," Discussion Papers 2010-07, School of Economics, The University of New South Wales.
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  8. Steven Stern & Bridget Hiedemann, 1999. "Strategic Play Among Family Members When Making Long-Term Care Decisions," Virginia Economics Online Papers 321, University of Virginia, Department of Economics.
  9. Maruyama, Shiko, 2014. "Estimation of finite sequential games," Journal of Econometrics, Elsevier, vol. 178(2), pages 716-726.
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  15. David Byrne & Michelle S. Goeree & Bridget Hiedemann & Steven Stern, 2009. "Formal Home Health Care, Informal Care, And Family Decision Making," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1205-1242, November.
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  19. Shiko Maruyama, 2012. "Inter Vivos Health Transfers: Final Days of Japanese Elderly Parents," Discussion Papers 2012-20, School of Economics, The University of New South Wales.
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Cited by:
  1. Shiko Maruyama & Meliyanni Johar, 2013. "Do Siblings Free-Ride in "Being There" for Parents?," Discussion Papers 2013-06, School of Economics, The University of New South Wales.
  2. Michelle Sovinsky & Steven Stern, 2012. "Dynamic Modelling of Long-Term Care Decisions," Working Papers 2012-019, Human Capital and Economic Opportunity Working Group.
  3. Michelle Sovinsky & Steven Stern, 2013. "Dynamic modelling of long-term care decisions," ECON - Working Papers 113, Department of Economics - University of Zurich.

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