Long-term care with myopic carers

Justina Klimaviciute, Pierre Pestieau and Jérôme Schoenmaeckers
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Pierre Pestieau: Université catholique de Louvain, LIDAM/CORE, Belgium

No 2026011, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper analyzes the design of a social policy scheme for long-term care in a setting where disabled elderly individuals receive care both informally, from family members, and formally, from professional providers. We introduce two key features: informal caregivers bear substantial physiological and psychological costs, and they tend to be myopic with respect to these health consequences. Under perfect observability, an optimal policy can induce caregivers to exercise caution and provide an appropriate level of informal care. However, when individual characteristics are not common knowledge, public policy must resort to distortions and indirect instruments to guide agents toward optimal behavior - a classic second-best problem.

Keywords: Long-term care; Myopia; Caregiving burden; Social insurance (search for similar items in EconPapers)
JEL-codes: D91 H21 J14 (search for similar items in EconPapers)
Pages: 23
Date: 2026-06-26
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:2026011

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