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Asymmetric information, strategic transfers and the design of long-term care policies

Author

Listed:
  • Chiara Canta

    (TBS - Toulouse Business School)

  • Helmuth Cremer

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the optimal design of social long-term care (LTC) insurance when the utility of informal caregivers is taken into account. Informal care is exchange-based. Children's cost of providing care is continuously distributed over some interval and is not observable. Parents choose a rule specifying transfers conditional on the level of informal care. We study first uniform provision of LTC and then a nonlinear policy depending on family transfers. In both cases, informal care increases with the children's welfare weight. Our theoretical analysis is completed by calibrated numerical solutions. Uniform public care should represent up to 40% of total care but its share decreases to about 30% as the weight of children increases. In the nonlinear case, public care increases with the children's cost of providing care at a faster rate when children's weight in social welfare is higher. It represents 100% of total care for families with high-cost children.

Suggested Citation

  • Chiara Canta & Helmuth Cremer, 2023. "Asymmetric information, strategic transfers and the design of long-term care policies," Post-Print hal-04076813, HAL.
    • Handle: RePEc:hal:journl:hal-04076813
    DOI: 10.1093/oep/gpac010
    Note: View the original document on HAL open archive server: https://hal.science/hal-04076813
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Long-term care; Informal care; Strategic bequests; Asymmetric information.;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private
    • J13 - Labor and Demographic Economics - - Demographic Economics - - - Fertility; Family Planning; Child Care; Children; Youth

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