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Where Should the Elderly Live and Who Should Pay for Their Care?

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  • Thomas Aronsson
  • Sören Blomquist
  • Luca Micheletto

Abstract

We consider a model with a population consisting of earners and retired persons; elderly care is publicly provided. There is one big city, where congestion effects and agglomeration forces are at work, and a number of small villages. We show how the externalities related to population mobility lead to an inefficient spatial distribution of earners and retirees, and we characterize the second-best solution. Decentralization of this solution in a fiscal federalism structure requires the use of taxes and subsidies proportional to the number of earners and retired persons living in the city and the villages. Copyright © The editors of the "Scandinavian Journal of Economics" 2010 .

Suggested Citation

  • Thomas Aronsson & Sören Blomquist & Luca Micheletto, 2010. "Where Should the Elderly Live and Who Should Pay for Their Care?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 289-314, June.
  • Handle: RePEc:bla:scandj:v:112:y:2010:i:2:p:289-314
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