De Donder, Philippe and Leroux, Marie-Louise (2015) The political choice of social long term care transfers when family gives time and money. TSE Working Paper, n. 15-569, Toulouse

Warning
There is a more recent version of this item available.
[thumbnail of wp_tse_569.pdf]
Preview
Text
Download (373kB) | Preview

Abstract

We develop a model where families consist of one parent and one child, with children differing in income and all agents having the same probability of becoming dependent when old. Young and old individuals vote over the size of a social long term care transfer program, which children complement with informal (time) or formal (money) help to their dependent parent. Dependent parents have an intrinsic preference over informal to monetary help. We first show that low (resp., high) income children provide informal (resp. formal) help, whose amount is decreasing (resp. increasing) with the child's income. The middle income class may give no family help at all, and its elderly members would be the main beneficiaries of the introduction of social LTC transfers. We then provide several reasons for the stylized fact that there are little social LTC transfers in most countries. First, social transfers are dominated by informal help when the intrinsic preference of dependent parents for informal help is large enough. Second, when the probability of becoming dependent is lower than one third, the children of autonomous parents are numerous enough to oppose democratically the introduction of social LTC transfers. Third, even when none of the first two conditions is satisfied, the majority voting equilibrium may entail no social transfers, especially if the probability of becoming dependent when old is not far above one third. This equilibrium may be local (meaning that it would be defeated by the introduction of a sufficiently large social program). This local majority equilibrium may be empirically relevant whenever new programs have to be introduced at a low scale before being eventually ramped up.

Item Type: Monograph (Working Paper)
Language: English
Date: 18 April 2015
Place of Publication: Toulouse
Uncontrolled Keywords: Majority Voting, local Condorcet winner, crowding out, intrinsic preference for informal help, tax reform
JEL Classification: D91 - Intertemporal Consumer Choice; Life Cycle Models and Saving
H55 - Social Security and Public Pensions
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 21 Sep 2015 13:08
Last Modified: 02 Apr 2021 15:49
OAI Identifier: oai:tse-fr.eu:29266
URI: https://publications.ut-capitole.fr/id/eprint/16885

Available Versions of this Item

View Item

Downloads

Downloads per month over past year