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Long Term Care, Altruism and Socialization

  • Ponthiere Gregory


    (Paris School of Economics - Ecole Normale Supérieure (Paris))

The public provision of long-term care (LTC) can replace family-provided LTC when adults are not sufficiently altruistic towards their parents. But State intervention can modify the transmission of values, and reduce the long-run prevalence of family altruism. To characterize the optimal LTC policy, we develop a three-period OLG model where the adult population is divided into altruistic and non-altruistic agents, and where the transmission of altruism follows a socialization process à la Bisin and Verdier (2001). It is shown that public LTC benefits, by reducing parental investment in children, make the long-run survival of family altruism less likely. However, whether crowding out arises or not depends on individual preferences and on the socialization mechanism at work. We also study the incompatibility of the optimal short-run LTC benefits with long-run social welfare maximization. Finally, we discuss the robustness of our results to introducing savings and universal LTC benefits.

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Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 13 (2012)
Issue (Month): 2 (November)
Pages: 1-47

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Handle: RePEc:bpj:bejeap:v:13:y:2012:i:2:p:1-47:n:1
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  1. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
  2. Grégory Ponthière, 2010. "Unequal Longevities and Lifestyles Transmission," Post-Print halshs-00754479, HAL.
  3. Sloan, Frank A & Picone, Gabriel & Hoerger, Thomas J, 1997. "The Supply of Children's Time to Disabled Elderly Parents," Economic Inquiry, Western Economic Association International, vol. 35(2), pages 295-308, April.
  4. Hoerger, Thomas J & Picone, Gabriel A & Sloan, Frank A, 1996. "Public Subsidies, Private Provision of Care and Living Arrangements of the Elderly," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 428-40, August.
  5. JOUSTEN, Alain & LIPSZYC, Barbara & MARCHAND, Maurice & PESTIEAU, Pierre, . "Long-term care insurance and optimal taxation for altruistic children," CORE Discussion Papers RP 1753, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Norton, Edward C., 2000. "Long-term care," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 17, pages 955-994 Elsevier.
  7. PESTIEAU, Pierre & PONTHIERE, Grégory, 2010. "Long term care insurance puzzle," CORE Discussion Papers 2010023, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Jeffrey R. Brown & Amy Finkelstein, 2008. "The Interaction of Public and Private Insurance: Medicaid and the Long-Term Care Insurance Market," American Economic Review, American Economic Association, vol. 98(3), pages 1083-1102, June.
  9. PESTIEAU, Pierre & SATO, Motohiro, 2004. "Long term care: the state, the market and the family," CORE Discussion Papers 2004082, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Jeffrey R. Brown & Amy Finkelstein, 2004. "Supply or Demand: Why is the Market for Long-Term Care Insurance So Small?," NBER Working Papers 10782, National Bureau of Economic Research, Inc.
  11. Sloan, Frank A & Norton, Edward C, 1997. "Adverse Selection, Bequests, Crowding Out, and Private Demand for Insurance: Evidence from the Long-Term Care Insurance Market," Journal of Risk and Uncertainty, Springer, vol. 15(3), pages 201-19, December.
  12. Javier Olivera, 2013. "Old-age Support and Demographic Transition in Developing Countries. A Cultural Transmission Model," Working Papers 201307, Geary Institute, University College Dublin.
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