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Adverse Selection in Elderly Care

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  • Amedeo Fossati

    ()
    (University of Genoa, Italy)

  • Marcello Montefiori

    ()
    (University of Genoa, Italy)

Abstract

This paper provides a theoretical model to analyse public funding of family elderly care when two severity type are present (the high and the low), under asymmetry of information and increasing costs. The social planner can redistribute between households, but because of incomplete information he is prevented from observing the type of household. The welfare optimum is characterized both under full and asymmetric information. Under complete information it turns out that the transfer has to be set in such a way to induce equality in the marginal utility of income. The direction of the transfer is no longer clear-cut (both under complete and asymmetric information). Specifically it cannot be ruled out that the transfer flows from the high severity / high cost type to the low severity /low cost type, where intuitively one would expect the opposite.

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File URL: http://www.dep.unige.it/RePEc/gea/wpaper/dwpo-7-nov2011.pdf
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Bibliographic Info

Paper provided by University of Genoa, Research Doctorate in Public Economics in its series DEP - series of economic working papers with number 7/2011.

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Date of creation: Nov 2011
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Handle: RePEc:gea:wpaper:7/2011

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Postal: University of Genoa c/o Marcello Montefiori via Vivaldi, 5 16126 Genova ITALY
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Web page: http://www.dep.unige.it/
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Keywords: asymmetric information; adverse selection; elderly care; redistribution;

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  1. Boadway, Robin & Pestieau, Pierre & Wildasin, David E, 1989. "Non-cooperative Behavior and Efficient Provision of Public Goods," Public Finance = Finances publiques, , vol. 44(1), pages 1-7.
  2. Richard C. Cornes & Emilson C.D. Silva, 1996. "Local Public Goods, Inter-Regional Transfers and Private Information," Keele Department of Economics Discussion Papers (1995-2001) 96/11, Department of Economics, Keele University.
  3. Buchholz, Wolfgang & Konrad, Kai A., 1995. "Strategic transfers and private provision of public goods," Journal of Public Economics, Elsevier, vol. 57(3), pages 489-505, July.
  4. Caplan, Arthur J. & Cornes, Richard C. & Silva, Emilson C. D., 2000. "Pure public goods and income redistribution in a federation with decentralized leadership and imperfect labor mobility," Journal of Public Economics, Elsevier, vol. 77(2), pages 265-284, August.
  5. Heitmueller, Axel & Inglis, Kirsty, 2007. "The earnings of informal carers: Wage differentials and opportunity costs," Journal of Health Economics, Elsevier, vol. 26(4), pages 821-841, July.
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