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Externality and Strategic Interaction in the Location Choice of Siblings under Altruism toward Parents

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  • Meliyanni Johar

    (University of Technology Sydney)

  • Shiko Maruyama

    ()
    (School of Economics, The University of New South Wales)

Abstract

When siblings wish for the well-being of their elderly parents, the cost of caregiving 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://research.economics.unsw.edu.au/RePEc/papers/2012-15.pdf
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Bibliographic Info

Paper provided by School of Economics, The University of New South Wales in its series Discussion Papers with number 2012-15.

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Length: 60 pages
Date of creation: Feb 2012
Date of revision:
Handle: RePEc:swe:wpaper:2012-15

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Keywords: living arrangements; informal care; free-rider problem; sequential game; first-mover advantages.;

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References

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  1. Benoit Dostie & Pierre Thomas Léger, 2004. "The Living Arrangement Dynamics of Sick, Elderly Individuals," CIRANO Working Papers 2004s-03, CIRANO.
  2. repec:dau:papers:123456789/1879 is not listed on IDEAS
  3. Shiko Maruyama, 2012. "Inter Vivos Health Transfers: Final Days of Japanese Elderly Parents," Discussion Papers 2012-20, School of Economics, The University of New South Wales.
  4. Axel Borsch-Supan & Laurence J. Kotlikoff & John N. Morris, 1988. "The Dynamics of Living Arrangements of the Elderly," NBER Working Papers 2787, National Bureau of Economic Research, Inc.
  5. Liliana E. Pezzin & Robert A. Pollak & Barbara S. Schone, 2006. "Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents," NBER Working Papers 12358, National Bureau of Economic Research, Inc.
  6. Konrad, Kai A & Künemund, Harald & Lommerud, Kjell Erik & Robledo, Julio R, 1999. "Geography of the Family," CEPR Discussion Papers 2312, C.E.P.R. Discussion Papers.
  7. Meliyanni Johar & Shiko Maruyama, 2011. "Intergenerational cohabitation in modern Indonesia: filial support and dependence," Health Economics, John Wiley & Sons, Ltd., vol. 20(S1), pages 87-104, 09.
  8. Tennille J. Checkovich & Steven Stern, 2002. "Shared Caregiving Responsibilities of Adult Siblings with Elderly Parents," Journal of Human Resources, University of Wisconsin Press, vol. 37(3), pages 441-478.
  9. Maruyama, Shiko, 2014. "Estimation of finite sequential games," Journal of Econometrics, Elsevier, vol. 178(2), pages 716-726.
  10. Maxim Engers & Steven Stern, 2002. "Long-Term Care and Family Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 73-114, February.
  11. 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.
  12. Liliana E. Pezzin & Barbara Steinberg Schone, 1999. "Intergenerational Household Formation, Female Labor Supply and Informal Caregiving: A Bargaining Approach," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 475-503.
  13. Hiedemann, Bridget & Stern, Steven, 1999. "Strategic play among family members when making long-term care decisions," Journal of Economic Behavior & Organization, Elsevier, vol. 40(1), pages 29-57, September.
  14. Bernheim, B Douglas & Shleifer, Andrei & Summers, Lawrence H, 1985. "The Strategic Bequest Motive," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1045-76, December.
  15. Hoerger, Thomas J. & Picone, Gabriel & Sloan, Frank, 1995. "Public Subsidies, Private Provision of Care, and Living Arrangements of the Elderly," Working Papers 95-22, Duke University, Department of Economics.
  16. McGarry, K & Schoeni, R-F, 1996. "Measurement and the Redistribution of Resources Within the Family," Papers 96-11, RAND - Reprint Series.
  17. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October.
  18. 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, vol. 50(4), pages 1205-1242, November.
  19. Holroyd, Eleanor, 2001. "Hong Kong Chinese daughters' intergenerational caregiving obligations: : a cultural model approach," Social Science & Medicine, Elsevier, vol. 53(9), pages 1125-1134, November.
  20. Berry, Steven T, 1992. "Estimation of a Model of Entry in the Airline Industry," Econometrica, 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 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 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 113, Department of Economics - University of Zurich.

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