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Private, social and self insurance for long-term care: A political economy analysis

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Author Info

  • DE DONDER, Philippe

    ()
    (IDEI, Toulouse School of Economics, France)

  • PESTIEAU, Pierre

    ()
    (Université de Liège, CREPP, B-4000 Liège, Belgium; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium; PSE, Paris, France and CEPR.)

Abstract

We analyze the determinants of the demand for social, private and self-insurance for long-term care in an environment where agents differ in income, probability of becoming dependent and of receiving family help. Uniform social benefits are financed with a proportional income tax and are thus redistributive, while private insurance is actuarially fair. We obtain a rich pattern of insights, depending on whether private insurance is available or not, on its loading factor, and on the correlation between, on the one hand, income and risk, and, on the other hand, income and family help. Although the availability of private insurance decreases the demand for social insurance, it only affects a minority of agents so that the majority-chosen social insurance level remains unaffected. Family support crowds out the demand for both private and social insurance, and may even suppress any demand for private insurance. Family help crowds out self-insurance only for agents whose demand for both social and private insurance is nil. A general increase in the probability of becoming dependent need not increase the demand for social insurance, since it decreases its return.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2011053.

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Date of creation: 21 Nov 2011
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Handle: RePEc:cor:louvco:2011053

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Related research

Keywords: long-term care; social insurance; family help; correlation between risk and income; voting;

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References

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  1. Bonsang, Eric, 2009. "Does informal care from children to their elderly parents substitute for formal care in Europe?," Journal of Health Economics, Elsevier, vol. 28(1), pages 143-154, January.
  2. CASAMATTA, Georges & CREMER, Helmuth & PESTIEAU, Pierre, 1999. "The political economy of social security," CORE Discussion Papers 1999055, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Nuscheler, Robert & Roeder, Kerstin, 2013. "The political economy of long-term care," Munich Reprints in Economics 19324, University of Munich, Department of Economics.
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Cited by:
  1. De Donder, Philippe & Leroux, Marie-Louise, 2012. "Behavioral Biases and Long Term Care Annuities: A Political Economy Approach," IDEI Working Papers 749, Institut d'Économie Industrielle (IDEI), Toulouse, revised Feb 2013.
  2. DE DONDER, Philippe & LEROUX, Marie-Louise, 2013. "Behavioral biases and long term care insurance: A political economy approach," CORE Discussion Papers 2013020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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