Canta, Chiara and Cremer, Helmuth (2020) Asymmetric information, strategic transfers, and the design of long-term care policies. TSE Working Paper, n. 20-1156, Toulouse

Warning
There is a more recent version of this item available.
[thumbnail of wp_tse_1156.pdf]
Preview
Text
Download (506kB) | Preview

Abstract

We study the design of social long-term care (LTC) insurance when informal care is exchange-based. Parents do not observe their children's cost of providing care, which is continuously distributed over some interval. They choose a rule specifying transfers that are conditional on the level of informal care. Social LTC insurance is designed to maximize a weighted sum of parents' and children's utility. The optimal uniform public LTC insurance can fully cover the risk of dependence but parents continue to bear the risk of having children with a high cost of providing care. A nonlinear policy conditioning LTC benets on transfers provides full insurance even for this risk. Informal care increases with the children's welfare weight. Our theoretical analysis is completed by numerical solutions based on a calibrated example. In the uniform case, 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 the families with high-cost children.

Item Type: Monograph (Working Paper)
Language: English
Date: November 2020
Place of Publication: Toulouse
Uncontrolled Keywords: Long-term care, informal care, strategic bequests, asymmetric information
JEL Classification: H2 - Taxation, Subsidies, and Revenue
H5 - National Government Expenditures and Related Policies
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 26 Nov 2020 14:52
Last Modified: 07 Jun 2022 07:23
OAI Identifier: oai:tse-fr.eu:124871
URI: https://publications.ut-capitole.fr/id/eprint/41873

Available Versions of this Item

View Item

Downloads

Downloads per month over past year