The political choice of social long term care transfers when family gives time and money

Philippe De Donder and Marie-Louise Leroux

No 848, IDEI Working Papers from Institut d'Économie Industrielle (IDEI), Toulouse

Abstract: We develop a model where families consist of one parent and one child, with children differing in income and all agents having the same probability of becoming dependent when old. Young and old individuals vote over the size of a social long term care transfer program, which children complement with informal (time) or formal (money) help to their dependent parent. Dependent parents have an intrinsic preference over informal to monetary help. We first show that low (resp., high) income children provide informal (resp. formal) help, whose amount is decreasing (resp. increasing) with the child's income. The middle income class may give no family help at all, and its elderly members would be the main beneficiaries of the introduction of social LTC transfers. We then provide several reasons for the stylized fact that there are little social LTC transfers in most countries. First, social transfers are dominated by informal help when the intrinsic preference of dependent parents for informal help is large enough. Second, when the probability of becoming dependent is lower than one third, the children of autonomous parents are numerous enough to oppose democratically the introduction of social LTC transfers. Third, even when none of the first two conditions is satisfied, the majority voting equilibrium may entail no social transfers, especially if the probability of becoming dependent when old is not far above one third. This equilibrium may be local (meaning that it would be defeated by the introduction of a sufficiently large social program). This local majority equilibrium may be empirically relevant whenever new programs have to be introduced at a low scale before being eventually ramped up.

Keywords: Majority Voting; local Condorcet winner; crowding out; intrinsic preference for informal help; tax reform (search for similar items in EconPapers)
JEL-codes: D91 H55 I13 (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-age and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The political choice of social long term care transfers when family gives time and money (2017)
Working Paper: The Political Choice of Social Long Term Care Transfers when Family Gives Time and Money (2015)
Working Paper: The political choice of social long term care transfers when family gives time and money (2015)
Working Paper: The political choice of social long-term care transfers when family gives time and money (2015)
Working Paper: The political choice of social long term care transfers when family gives time and money (2015)
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