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The political choice of social long term care transfers when family gives time and money

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  • De Donder, Philippe
  • Leroux, Marie-Louise

Abstract

We develop a model where families consist of one parent and one child, with children differing in income and all agents having the same probability of becoming dependent when old. Young and old individuals vote over the size of a social long term care transfer program, which children complement with informal (time) or formal (money) help to their dependent parent. Dependent parents have an intrinsic preference over informal to monetary help. We first show that low (resp., high) income children provide informal (resp. formal) help, whose amount is decreasing (resp. increasing) with the child's income. The middle income class may give no family help at all, and its elderly members would be the main beneficiaries of the introduction of social LTC transfers. We then provide several reasons for the stylized fact that there are little social LTC transfers in most countries. First, social transfers are dominated by informal help when the intrinsic preference of dependent parents for informal help is large enough. Second, when the probability of becoming dependent is lower than one third, the children of autonomous parents are numerous enough to oppose democratically the introduction of social LTC transfers. Third, even when none of the first two conditions is satisfied, the majority voting equilibrium may entail no social transfers, especially if the probability of becoming dependent when old is not far above one third. This equilibrium may be local (meaning that it would be defeated by the introduction of a sufficiently large social program). This local majority equilibrium may be empirically relevant whenever new programs have to be introduced at a low scale before being eventually ramped up.

Suggested Citation

  • De Donder, Philippe & Leroux, Marie-Louise, 2015. "The political choice of social long term care transfers when family gives time and money," TSE Working Papers 15-569, Toulouse School of Economics (TSE), revised 26 May 2015.
  • Handle: RePEc:tse:wpaper:29266
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    Cited by:

    1. Philippe De Donder & Marie‐Louise Leroux, 2021. "Long term care insurance with state‐dependent preferences," Health Economics, John Wiley & Sons, Ltd., vol. 30(12), pages 3074-3086, December.
    2. Klimaviciute, Justina & Pestieau, Pierre, 2022. "The economics of long-term care. An overview," LIDAM Discussion Papers CORE 2022004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. repec:bla:annpce:v:89:y:2018:i:1:p:49-63 is not listed on IDEAS
    4. Georges Casamatta & L. Batté, 2016. "The Political Economy of Population Aging," Post-Print hal-02520521, HAL.
    5. J. Iñaki De La Peña & M. Cristina Fernández-Ramos & Asier Garayeta & Iratxe D. Martín, 2022. "Transforming Private Pensions: An Actuarial Model to Face Long-Term Costs," Mathematics, MDPI, vol. 10(7), pages 1-17, March.
    6. Casamatta, G. & Batté, L., 2016. "The Political Economy of Population Aging," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 381-444, Elsevier.

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    More about this item

    Keywords

    Majority Voting; local Condorcet winner; crowding out; intrinsic preference for informal help; tax reform;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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