Cremer, Helmuth and Canta, Chiara (2023) Asymmetric information, strategic transfers and the design of long-term care policies. Oxford Economic Papers, vol. 75 (n° 1). pp. 117-141.

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Identification Number : 10.1093/oep/gpac010


We study the optimal design of social long-term care (LTC) insurance when the utility of informal caregivers is taken into account. Informal care is exchange-based. Children’s cost of providing care is continuously distributed over some interval and is not observable. Parents choose a rule specifying transfers conditional on the level of informal care. We study first uniform provision of LTC and then a nonlinear policy depending on family transfers. In both cases, informal care increases with the children’s welfare weight. Our theoretical analysis is completed by calibrated numerical solutions. Uniform 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 families with high-cost children.

Item Type: Article
Language: English
Date: January 2023
Refereed: Yes
JEL Classification: H24 - Personal Income and Other Nonbusiness Taxes and Subsidies
H52 - Government Expenditures and Education
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 21 Apr 2023 07:44
Last Modified: 21 Apr 2023 07:44
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