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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. Steven Stern & Tennille J. Neuharth, 2000. "Shared Caregiving Responsibilities of Adult Siblings with Elderly Parents," Virginia Economics Online Papers 323, University of Virginia, Department of Economics.
  2. Liliana E. Pezzin & Robert A. Pollak & Barbara S. Schone, 2007. "Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents," CESifo Working Paper Series 1908, CESifo Group Munich.
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  6. Hoerger, Thomas J & Picone, Gabriel A & Sloan, Frank A, 1996. "Public Subsidies, Private Provision of Care and Living Arrangements of the Elderly," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 428-40, August.
  7. 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.
  8. Shiko Maruyama, 2012. "Inter Vivos Health Transfers: Final Days of Japanese Elderly Parents," Discussion Papers, School of Economics, The University of New South Wales 2012-20, School of Economics, The University of New South Wales.
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  13. Meliyanni Johar & Shiko Maruyama, 2010. "Intergenerational Cohabitation in Modern Indonesia: Filial Support and Dependence," Discussion Papers, School of Economics, The University of New South Wales 2010-07, School of Economics, The University of New South Wales.
  14. 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, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1205-1242, November.
  15. Shiko Maruyama, 2010. "Estimation of Finite Sequential Games," Discussion Papers, School of Economics, The University of New South Wales 2010-22, School of Economics, The University of New South Wales.
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  17. repec:dau:papers:123456789/1879 is not listed on IDEAS
  18. 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.
  19. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, Econometric Society, Econometric Society, vol. 60(4), pages 889-917, July.
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Cited by:
  1. Shiko Maruyama & Meliyanni Johar, 2013. "Do Siblings Free-Ride in "Being There" for Parents?," Discussion Papers, School of Economics, The University of New South Wales 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, Human Capital and Economic Opportunity Working Group 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, Department of Economics - University of Zurich 113, Department of Economics - University of Zurich.

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