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Alternative approaches to Long Term Care financing. Distributive implications and sustainability for Italy

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  • Massimo Baldini

    ()

  • Luca Beltrametti

    ()

Abstract

In the last decade, many countries have adopted tax schemes specifically aimed at financing programs for Long Term Care (LTC). These mechanisms have important distributional implications both within and across generations. Given the process of demographic ageing, the issue of inter and intra-generational fairness is deeply linked with the problem of the long-term financial equilibrium of an LTC fund. In this paper we first compare, on a microdata sample of the Italian population, the distributive effects (both on current income and across generations) of six alternative approaches to finance an LTC scheme. In particular, we consider a hypothetical LTC scheme (with a size equivalent to that of the German one) to be introduced in Italy and analyse the distributive implications of some tax options, taken from the financing mechanisms implemented or under discussion in Germany, Luxembourg, Japan and Italy.In the second part of the paper we move from a static to a dynamic perspective: we study the long-term sustainability of an hypothetical Pay as You Go (Payg) LTC scheme operating in Italy (that is, assuming the Italian projected demographic trends) under scenarios that consider alternative indexation rules, growth rates of GNP, future incidence of disability among age groups.

Suggested Citation

  • Massimo Baldini & Luca Beltrametti, 2005. "Alternative approaches to Long Term Care financing. Distributive implications and sustainability for Italy," Center for the Analysis of Public Policies (CAPP) 0009, Universita di Modena e Reggio Emilia, Dipartimento di Economia "Marco Biagi".
  • Handle: RePEc:mod:cappmo:0009
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    References listed on IDEAS

    as
    1. Andrea Brandolini, 1999. "The Distribution of Personal Income in Post-War Italy: Source Description, Data Quality, and the Time Pattern of Income Inequality," Giornale degli Economisti, GDE (Giornale degli Economisti e Annali di Economia), Bocconi University, vol. 58(2), pages 183-239, September.
    2. repec:crr:issbrf:ib2005-30 is not listed on IDEAS
    3. Massimo Baldini & Stefano Toso & Paolo Bosi, 2002. "Targeting welfare in Italy: old problems and perspectives on reform," Fiscal Studies, Institute for Fiscal Studies, vol. 23(1), pages 51-75, March.
    4. Sutherland, Holly & Immervoll, Herwig & O'Donoghue, Cathal, 1999. "An introduction to EUROMOD," EUROMOD Working Papers EM0/99, EUROMOD at the Institute for Social and Economic Research.
    5. Palacios, Robert, 2002. "Managing public pension reserves Part II : lessons from five recent OECD initiatives," Social Protection and Labor Policy and Technical Notes 33407, The World Bank.
    6. Assaf Razin & Efraim Sadka, 2005. "The Decline of the Welfare State: Demography and Globalization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262182440, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    long term care; distributive effects; tax-benefit model; intertemporal sustainability; trust fund;

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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