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Alternative approaches to Long Term Care financing. Distributive implications and sustainability for Italy

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  • Massimo Baldini

    ()

  • Luca Beltrametti

    ()

Abstract

In the last decade, many countries have adopted tax schemes specifically aimed at financing programs for Long Term Care (LTC). These mechanisms have important distributional implications both within and across generations. Given the process of demographic ageing, the issue of inter and intra-generational fairness is deeply linked with the problem of the long-term financial equilibrium of an LTC fund. In this paper we first compare, on a microdata sample of the Italian population, the distributive effects (both on current income and across generations) of six alternative approaches to finance an LTC scheme. In particular, we consider a hypothetical LTC scheme (with a size equivalent to that of the German one) to be introduced in Italy and analyse the distributive implications of some tax options, taken from the financing mechanisms implemented or under discussion in Germany, Luxembourg, Japan and Italy.In the second part of the paper we move from a static to a dynamic perspective: we study the long-term sustainability of an hypothetical Pay as You Go (Payg) LTC scheme operating in Italy (that is, assuming the Italian projected demographic trends) under scenarios that consider alternative indexation rules, growth rates of GNP, future incidence of disability among age groups.

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Paper provided by Universita di Modena e Reggio Emilia, Dipartimento di Economia Politica in its series Center for the Analysis of Public Policies (CAPP) with number 0009.

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Length: pages 28
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:mod:cappmo:0009

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Web page: http://www.capp.unimore.it
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Keywords: long term care; distributive effects; tax-benefit model; intertemporal sustainability; trust fund;

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  1. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(2), pages 183-239, September.
  2. Sutherland, Holly & Immervoll, Herwig & O'Donoghue, Cathal, 1999. "An introduction to EUROMOD," EUROMOD Working Papers EM0/99, EUROMOD at the Institute for Social and Economic Research.
  3. Palacios, Robert, 2002. "Managing public pension reserves Part II : lessons from five recent OECD initiatives," Social Protection Discussion Papers 33407, The World Bank.
  4. Assaf Razin & Efraim Sadka, 2005. "The Decline of the Welfare State: Demography and Globalization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182440.
  5. Adam, S. & Brewer, M. & Wakefield, M., 2005. "Tax and benefit changes: who wins and who loses?," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  6. Massimo Baldini & Stefano Toso & Paolo Bosi, 2002. "Targeting welfare in Italy: old problems and perspectives on reform," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 51-75, March.
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