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Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance

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  • Canta, Chiara
  • Cremer, Helmuth
  • Gahvari, Firouz

Abstract

We study the role and design of private and public insurance programs when informal care is uncertain. Children's degree of altruism is represented by a parameter which is randomly distributed over some interval. The level of informal care on which dependent elderly can count is therefore random. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider two types of LTC policies. A topping up (TU ) scheme provides a transfer which is non exclusive and can be supplemented. An opting out (OO) scheme is exclusive and cannot be topped up. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out solely at the extensive margin. However, OO is not necessarily the dominant policy as it may exacerbate crowding out at the extensive margin. Finally, we show that the distortions of both policies can be mitigated by using an appropriately designed mixed policy.

Suggested Citation

  • Canta, Chiara & Cremer, Helmuth & Gahvari, Firouz, 2016. "Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance," TSE Working Papers 16-685, Toulouse School of Economics (TSE).
  • Handle: RePEc:tse:wpaper:30580
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    References listed on IDEAS

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    1. Jeffrey R. Brown & Amy Finkelstein, 2009. "The Private Market for Long‐Term Care Insurance in the United States: A Review of the Evidence," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 76(1), pages 5-29, March.
    2. 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.
    3. Blomquist, Soren & Christiansen, Vidar, 1998. "Topping Up or Opting Out? The Optimal Design of Public Provision Schemes," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 399-411, May.
    4. Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2017. "Uncertain altruism and the provision of long term care," Journal of Public Economics, Elsevier, vol. 151(C), pages 12-24.
    5. Jeffrey R. Brown & Amy Finkelstein, 2011. "Insuring Long-Term Care in the United States," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 119-142, Fall.
    6. CREMER, Helmuth & PESTIEAU, Pierre & PONTHIERE, Grégory, 2012. "The economics of long-term care: a survey," LIDAM Discussion Papers CORE 2012030, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Janet Currie & Firouz Gahvari, 2008. "Transfers in Cash and In-Kind: Theory Meets the Data," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 333-383, June.
    8. Jeffrey Brown & Amy Finkelstein, 2011. "Insuring Long Term Care In the US," NBER Working Papers 17451, National Bureau of Economic Research, Inc.
    9. Blomquist, Suren & Christiansen, Vidar, 1995. " Public Provision of Private Goods as a Redistributive Device in an Optimum Income Tax Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 547-567, December.
    10. Joan Costa-Font & Christophe Courbage (ed.), 2012. "Financing Long-Term Care in Europe," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-34919-3, September.
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    Cited by:

    1. Martín Caruso Bloeck & Sebastian Galiani & Pablo Ibarrarán, 2019. "Long-Term Care in Latin America and the Caribbean: Theory and Policy Considerations," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Fall 2019), pages 1-32, October.
    2. Chiara Canta & Helmuth Cremer, 2023. "Asymmetric information, strategic transfers, and the design of long-term care policies," Oxford Economic Papers, Oxford University Press, vol. 75(1), pages 117-141.
    3. Canta, Chiara & Cremer, Helmuth, 2019. "Long-term care policy with nonlinear strategic bequests," European Economic Review, Elsevier, vol. 119(C), pages 548-566.
    4. Canta, Chiara & Cremer, Helmuth, 2018. "Uncertain Altruism and Non-Linear Long-Term Care Policies," IZA Discussion Papers 11619, Institute of Labor Economics (IZA).
    5. repec:bla:annpce:v:89:y:2018:i:1:p:49-63 is not listed on IDEAS
    6. Chiara Canta & Helmuth Cremer, 2021. "Opting out and topping up reconsidered: Informal care under uncertain altruism," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(1), pages 259-283, February.

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    More about this item

    Keywords

    Long term care; uncertain altruism; private insurance; public insurance; topping up; opting out;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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