Private, social and self insurance for long-term care: A political economy analysis

Philippe De Donder and Pierre Pestieau

No 2011053, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We analyze the determinants of the demand for social, private and self-insurance for long-term care in an environment where agents differ in income, probability of becoming dependent and of receiving family help. Uniform social benefits are financed with a proportional income tax and are thus redistributive, while private insurance is actuarially fair. We obtain a rich pattern of insights, depending on whether private insurance is available or not, on its loading factor, and on the correlation between, on the one hand, income and risk, and, on the other hand, income and family help. Although the availability of private insurance decreases the demand for social insurance, it only affects a minority of agents so that the majority-chosen social insurance level remains unaffected. Family support crowds out the demand for both private and social insurance, and may even suppress any demand for private insurance. Family help crowds out self-insurance only for agents whose demand for both social and private insurance is nil. A general increase in the probability of becoming dependent need not increase the demand for social insurance, since it decreases its return.

Keywords: long-term care; social insurance; family help; correlation between risk and income; voting (search for similar items in EconPapers)
JEL-codes: H24 H31 H42 I11 (search for similar items in EconPapers)
Date: 2011-11-21
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Private, social and self insurance for longterm care: a political economy analysis (2014)
Working Paper: Private, social and self insurance for longterm care: a political economy analysis (2014)
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