eprintid: 15311 rev_number: 8 eprint_status: archive userid: 1482 importid: 105 dir: disk0/00/01/53/11 datestamp: 2014-07-09 17:26:34 lastmod: 2021-04-02 15:47:41 status_changed: 2014-07-09 17:26:34 type: monograph metadata_visibility: no_search creators_name: Cremer, Helmuth creators_name: Roeder, Kerstin creators_idrefppn: 058485376 creators_affiliation: Toulouse School of Economics creators_affiliation: LMU, Munich title: Long-term care policy, myopia and redistribution ispublished: pub subjects: subjects_ECO abstract: This paper examines whether myopia (misperception of the long-term care (LTC) risk) and private insurance market loading costs can justify social LTC insurance and/or the subsidization of private insurance. We use a two-period model wherein individuals differ in three unobservable characteristics: level of productivity, survival probability and degree of ignorance concerning the risk of LTC (the former two being perfectly positively correlated). The decentralization of a first-best allocation requires that LTC insurance premiums of the myopic agents are subsidized (at a "Pigouvian" rate) and/or that there is public provision of the appropriate level of LTC. The support for the considered LTC policy instruments is less strong in a second-best setting. When social LTC provision is restricted to zero, a myopic agent's tax on private LTC insurance premiums involves a tradeoff between paternalistic and redistributive (incentive) considerations and we may have a tax as well as a subsidy on private LTC insurance. Interestingly, savings (which goes untaxed in the first-best but plays the role of self-insurance in the second-best) is also subject to (positive or negative) taxation. Social LTC provision is never second-best optimal when private insurance markets are fair (irrespective of the degree of the proportion of myopic individuals and their degree of misperception). At the other extreme, when the loading factor in the private sector is sufficiently high, private coverage is completely crowded out by public provision. For intermediate levels of the loading factors, the solution relies on both types of insurance. date: 2011-11 date_type: published publisher: TSE Working Paper official_url: http://tse-fr.eu/pub/25891 faculty: tse divisions: tse language: en has_fulltext: TRUE subjectsJEL: JEL_D91 subjectsJEL: JEL_H21 subjectsJEL: JEL_I13 view_date_year: 2011 full_text_status: public monograph_type: working_paper series: TSE Working Paper volume: 12-314 book_title: TSE Working Paper oai_identifier: oai:tse-fr.eu:25891 harvester_local_overwrite: oai_set harvester_local_overwrite: faculty harvester_local_overwrite: site harvester_local_overwrite: creators_idrefppn oai_lastmod: 2015-07-31T18:00:02Z oai_set: tse oai_set: ut1c site: ut1 citation: Cremer, Helmuth and Roeder, Kerstin (2011) Long-term care policy, myopia and redistribution. TSE Working Paper, n. 12-314 document_url: https://publications.ut-capitole.fr/id/eprint/15311/1/wp_tse_314.pdf