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Uncertain altruism and the provision of long term care

Author

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  • Cremer, Helmuth
  • Gahvari, Firouz
  • Pestieau, Pierre

Abstract

When family assistance is uncertain, benefits cannot be conditioned on family aid. We study the role of private and public LTC insurance in this environment and compare the properties and optimality of the topping up versus opting out public insurance schemes. Under topping up, the required LTC is less than full insurance and should be provided publicly unless private insurance market for dependency is fair. With an opting out scheme, there will be three possible equilibria depending on the children's degree of altruism. These imply: full LTC insurance with no aid from children, less than full insurance just enough to induce aid, and full insurance with aid. Fair private insurance can support only the first equilibrium. Opting out policies are self-targeted and dominate topping up schemes when the degree of children's altruism is sufficiently large. However, when the degree of altruism is small the dominance goes in the opposite direction.

Suggested Citation

  • Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2017. "Uncertain altruism and the provision of long term care," Journal of Public Economics, Elsevier, vol. 151(C), pages 12-24.
  • Handle: RePEc:eee:pubeco:v:151:y:2017:i:c:p:12-24
    DOI: 10.1016/j.jpubeco.2017.05.001
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    References listed on IDEAS

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    1. M.L. Leroux & P. Pestieau, 2014. "Social Security and Family Support," Canadian Journal of Economics, Canadian Economics Association, vol. 47(1), pages 115-143, February.
    2. Kotlikoff, Laurence J & Spivak, Avia, 1981. "The Family as an Incomplete Annuities Market," Journal of Political Economy, University of Chicago Press, vol. 89(2), pages 372-391, April.
    3. Cremer Helmuth & Gahvari Firouz & Pestieau Pierre, 2013. "Endogenous Altruism, Redistribution, and Long-Term Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 499-524, July.
    4. Helmuth Cremer & Pierre Pestieau, 2014. "Social long-term care insurance and redistribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(6), pages 955-974, December.
    5. Cremer, Helmuth & Roeder, Kerstin, 2013. "Long-term care policy, myopia and redistribution," Journal of Public Economics, Elsevier, vol. 108(C), pages 33-43.
    6. Donald Cox & Oded Stark, 2007. "On the Demand for Grandchildren: Tied Transfers and the Demonstration Effect," Chapters,in: Handbook on the Economics of Happiness, chapter 18 Edward Elgar Publishing.
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    8. Pierre Pestieau & Grégory Ponthière, 2011. "The Long Term Care Insurance Puzzle," Post-Print halshs-00754802, HAL.
    9. David C. Grabowski & Edward C. Norton & Courtney H. Van Houtven, 2012. "Informal Care," Chapters,in: The Elgar Companion to Health Economics, Second Edition, chapter 30 Edward Elgar Publishing.
    10. CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The economics of long-term care: a survey," CORE Discussion Papers 2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Chakrabarti, Subir & Lord, William & Rangazas, Peter, 1993. "Uncertain Altruism and Investment in Children," American Economic Review, American Economic Association, vol. 83(4), pages 994-1002, September.
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    Citations

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    Cited by:

    1. Cremer, Helmuth & Pestieau, Pierre, 2014. "Means-tested long term care and family transfers," TSE Working Papers 14-492, Toulouse School of Economics (TSE).
    2. Canta, Chiara & Cremer, Helmuth & Gahvari, Firouz, 2016. "Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance," IDEI Working Papers 864, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Cremer Helmuth & Gahvari Firouz & Pestieau Pierre, 2013. "Endogenous Altruism, Redistribution, and Long-Term Care," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 14(2), pages 499-524, July.
    4. Helmuth Cremer & Pierre Pestieau, 2014. "Social long-term care insurance and redistribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(6), pages 955-974, December.
    5. Pierre Pestieau & Grégory Ponthière, 2015. "Long-term care and births timing," Working Papers halshs-01131236, HAL.
    6. PESTIEAU, Pierre & PONTHIERE, Gregory, 2016. "The Public Economics of Long Term Care," CORE Discussion Papers 2016008, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Cremer, Helmuth & Roeder, Kerstin, 2013. "Long-Term Care and Lazy Rotten Kids," IZA Discussion Papers 7565, Institute for the Study of Labor (IZA).
    8. Pestieau, Pierre & Ponthiere, Gregory, 2016. "Long-term care and births timing," Journal of Health Economics, Elsevier, vol. 50(C), pages 340-357.
    9. Paul Belleflamme & Paul Bloch, 2013. "Dynamic Protection of Innovations through Patents and Trade Secrets," CESifo Working Paper Series 4486, CESifo Group Munich.
    10. Bauwens, Luc & Grigoryeva, Lyudmila & Ortega, Juan-Pablo, 2016. "Estimation and empirical performance of non-scalar dynamic conditional correlation models," Computational Statistics & Data Analysis, Elsevier, vol. 100(C), pages 17-36.

    More about this item

    Keywords

    Long term care; Uncertain altruism; Private insurance; Public insurance; Topping up; Opting out;

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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