Long-term care policy, myopia and redistribution

Helmuth Cremer and Kerstin Roeder ()

Journal of Public Economics, 2013, vol. 108, issue C, 33-43

Abstract: This paper examines whether myopia (misperception of the old age dependency risk) and private insurance market loading costs can justify public long-term care (LTC) provision and/or the subsidization of private insurance. Individuals differ in dependency risk, productivity and degree of risk misperception. The former two are positively correlated (because of the longevity factor) and social insurance tends to be regressive. A first-best solution requires subsidization of private insurance and/or public provision of the appropriate level of LTC. The support for these instruments is less strong in a second-best setting, as there may be a conflict between the correction for myopia and redistribution. Public LTC provision is never optimal when private insurance markets are fair (irrespective of the proportion of myopic individuals and their degree of misperception). Under loading costs, the solution may require a combination of private and public insurance or even rely solely on public provision.

Keywords: Long-term care; Myopia; Optimal taxation (search for similar items in EconPapers)
JEL-codes: D91 H21 I13 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272713001746
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Long-term care policy, myopia and redistribution (2013)
Working Paper: Long-Term Care Policy, Myopia and Redistribution (2012)
Working Paper: Long-term care policy, myopia and redistribution (2012)
Working Paper: Long-term care policy, myopia and redistribution (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:108:y:2013:i:c:p:33-43

DOI: 10.1016/j.jpubeco.2013.09.004

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().