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Long-term care insurance and optimal taxation for altruistic children

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  • JOUSTEN, Alain
  • LIPSZYC, Barbara
  • MARCHAND, Maurice
  • PESTIEAU, Pierre

Abstract

We model long-term care insurance in an optimal taxation framework. Every adult decides upon the amount and type of care he purchases for his dependent parent. We consider two alternatives: nursing-home care provided by the government, and home care paid by the child with some lump-sum subsidy by the government. The only source of information asymmetry is the government's inability to observe the degree of altruism of the adult child for his/her parent. Further tax collection entails some social costs. In such a second-best setting, we show that the quality of institutional care has to be kept relatively low and that compared to altruistic children, nonaltruistic ones enjoy a high level of consumption.
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Suggested Citation

  • JOUSTEN, Alain & LIPSZYC, Barbara & MARCHAND, Maurice & PESTIEAU, Pierre, 2005. "Long-term care insurance and optimal taxation for altruistic children," LIDAM Reprints CORE 1753, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:1753
    Note: In : FinanzArchiv, 61(1), 1-18, 2005
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    More about this item

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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