Uncertain altruism and the provision of long term care
This paper studies the role of private and public long term care (LTC) insurance programs in a world in which family assistance is uncertain. Benefits are paid in case of disability but cannot be conditioned (directly), due to moral hazard problems, on family aid. Under a topping up scheme, when the probability of altruism is high, there is no need for insurance. At lower probabilities, insurance is required, thought not full insurance. This can be provided either privately or publicly if insurance premiums are fair, and publicly otherwise. Moreover, the amount of LTC insurance varies negatively with the probability of altruism. With an opting out scheme, there will be three possible equilibria depending on the childrenâ€™s degree of altruism being â€œlow,â€ â€œmoderate,â€ or â€œvery highâ€. 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 markets can support the first equilibrium, but not the other two equilibria. Only a public opting-out scheme can attain them by creating incentives for self-targeting and ensuring that only dependent parents who are not helped by their children seek help from the government.
|Date of creation:||23 Sep 2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Laurence J. Kotlikoff & Avia Spivak, 1979.
"The Family as an Incomplete Annuities Market,"
NBER Working Papers
0362, National Bureau of Economic Research, Inc.
- Nigar Hashimzade & Jean Hindriks & Gareth D. Myles, 2006. "Solutions Manual to Accompany Intermediate Public Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582694, June.
- 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.
- Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2013. "Endogenous altruism, redistribution, and long term care," TSE Working Papers 13-386, Toulouse School of Economics (TSE).
- Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2013. "Endogenous altruism, redistribution, and long term care," IDEI Working Papers 768, Institut d'Économie Industrielle (IDEI), Toulouse.
- 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.
- 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.
- CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, GrÃ©gory, 2012.
"The economics of long-term care: a survey,"
CORE Discussion Papers
2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- 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.
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2013047. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.