Adverse Selection in Elderly Care
AbstractThis 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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Bibliographic InfoPaper provided by University of Genoa, Research Doctorate in Public Economics in its series DEP - series of economic working papers with number 7/2011.
Date of creation: Nov 2011
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asymmetric information; adverse selection; elderly care; redistribution;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
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