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Family altruism and long-term care insurance

Justina Klimaviciute, Pierre Pestieau () and Jérôme Schoenmaeckers ()
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Jérôme Schoenmaeckers: University of Liège

The Geneva Papers on Risk and Insurance - Issues and Practice, 2019, vol. 44, issue 2, 216-230

Abstract: Abstract The aim of this paper is to analyse long-term care (LTC) insurance purchase decisions by parents who expect to receive assistance from altruistic children. We first propose a simple theoretical model in which we show that the effect of children’s altruism on parents’ insurance decisions is ambiguous and depends on a number of factors: the degree of substitutability between informal and formal care, the degree of parental altruism, and the curvature of the utility functions. We then run an empirical test using data from the U.S., France, Spain, Germany and Israel, and proxy altruism with assistance provided to healthy parents. We find that the effect of children’s altruism is negative in Germany and Israel but not significant in the United States, France and Spain, which possibly suggests that the different forces identified in the theoretical model offset each other.

Keywords: Long-term care insurance; Altruism; Informal care (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:pal:gpprii:v:44:y:2019:i:2:d:10.1057_s41288-018-00117-3