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

  • Thomas Aronsson
  • Sören Blomquist
  • Luca Micheletto

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 .

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 112 (2010)
Issue (Month): 2 (06)
Pages: 289-314

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Handle: RePEc:bla:scandj:v:112:y:2010:i:2:p:289-314
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