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Long-term Care Insurance and Optimal Taxation for Altruistic Children

Author

Listed:
  • Alain Jousten
  • Barbara Lipszyc
  • Maurice Marchand
  • Pierre Pestieau

Abstract

We model long-term care insurance in an optimal taxation framework. Every adult decides upon the amount and type of care he purchases for his dependent parent. We consider two alternatives: nursing-home care provided by the government, and home care paid by the child with some lump-sum subsidy by the government. The only source of information asymmetry is the government's inability to observe the degree of altruism of the adult child for his/her parent. Further tax collection entails some social costs. In such a second-best setting, we show that the quality of institutional care has to be kept relatively low and that compared to altruistic children, nonaltruistic ones enjoy a high level of consumption.

Suggested Citation

  • Alain Jousten & Barbara Lipszyc & Maurice Marchand & Pierre Pestieau, 2005. "Long-term Care Insurance and Optimal Taxation for Altruistic Children," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 61(1), pages 1-18, March.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200503)61:1_1:lciaot_2.0.tx_2-4
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    References listed on IDEAS

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    More about this item

    Keywords

    long-term care; altruism; social security;

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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