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Old age or dependence. Which social insurance?

Author

Listed:
  • Nishimura, Yukihiro
  • Pestieau, Pierre

Abstract

In recent decades, there has been an increase in life expectancy and a rapid increase of the very senior dependency ratio in developed countries. In this context, we examine the optimal levels of public pensions and public long-term care (LTC) insurance. According to the most reasonable estimates of correlations among individual incomes, risks of mortality and dependency, we show that it is always desirable for a utilitarian social planner to have a balanced budget increase in LTC benefits at the expense of public pension benefits, until the cost of LTC is fully covered. This is true with or without liquidity constraints. For a Rawlsian planner, the balance between the two schemes depends on a comparison of the ratio of the survival probability to the dependence risk of the poor with its population average.

Suggested Citation

  • Nishimura, Yukihiro & Pestieau, Pierre, 2022. "Old age or dependence. Which social insurance?," LIDAM Reprints CORE 3195, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:3195
    Note: In: Journal of Public Economic Theory, 2022
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    Cited by:

    1. Justina Klimaviciute & Pierre Pestieau, 2023. "The economics of long‐term care. An overview," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1192-1213, September.
    2. Xiaoqing Pan & Bo Li & Jing Wu, 2024. "The effects of digital economy development on social insurance funds revenue: Evidence from China," PLOS ONE, Public Library of Science, vol. 19(5), pages 1-17, May.

    More about this item

    Keywords

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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