Cremer, Helmuth, Gahvari, Firouz and Pestieau, Pierre (2013) Endogenous altruism, redistribution, and long term care. B. E. Journal of Economic Analysis & Policy (Advances), 14 (2). pp. 499-524.

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Identification Number : 10.1515/bejeap-2012-0065


This paper studies public provision of long term care insurance in a world in which
family assistance is (i) uncertain and (ii) endogenous depending on the time parents
spend raising their children. Public benefits will be paid in case of disability but cannot
be combined with self-insurance or family aid. The benefits are provided equally to
all recipients and financed by a proportional payroll tax. The paper shows that tax
distortions imply that full insurance is undesirable. It characterizes the optimal tax and
identifies the elements that determine its size. Of crucial importance are the extent of
under-insurance, the effect of the tax on the probability of altruism, the distortionary
effect of the tax, and, with wage heterogeneity, the covariance between the social mar-
ginal utility of lifetime income and (i) earnings (positive effect) and (ii) the probability
of altruism default (negative effect).

Item Type: Article
Language: English
Date: July 2013
Refereed: Yes
JEL Classification: H2 - Taxation, Subsidies, and Revenue
H5 - National Government Expenditures and Related Policies
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 09 Jul 2014 17:42
Last Modified: 02 Apr 2021 15:48
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