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Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance

Chiara Canta (), Helmuth Cremer () and Firouz Gahvari ()

No 16-685, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study the role and design of private and public insurance programs when informal care is uncertain. Children's degree of altruism is represented by a parameter which is randomly distributed over some interval. The level of informal care on which dependent elderly can count is therefore random. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider two types of LTC policies. A topping up (TU ) scheme provides a transfer which is non exclusive and can be supplemented. An opting out (OO) scheme is exclusive and cannot be topped up. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out solely at the extensive margin. However, OO is not necessarily the dominant policy as it may exacerbate crowding out at the extensive margin. Finally, we show that the distortions of both policies can be mitigated by using an appropriately designed mixed policy.

Keywords: Long term care; uncertain altruism; private insurance; public insurance; topping up; opting out (search for similar items in EconPapers)
JEL-codes: H2 H5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-cse, nep-hea, nep-ias and nep-pbe
Date: 2016-07
References: View references in EconPapers View complete reference list from CitEc
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Related works:
Working Paper: Maybe "honor thy father and thy mother": uncertain family aid and the design of social long term care insurance (2017) Downloads
Working Paper: Maybe "Honor Thy Father and Thy Mother": Uncertain Family Aid and the Design of Social Long Term Care Insurance (2016) Downloads
Working Paper: Maybe "honor thy father and thy mother": uncertainfamily aid and the design of social long term care insurance (2016) Downloads
Working Paper: Maybe "Honor thy Father and thy Mother": Uncertain Family Aid and the Design of Social Long Term Care Insurance (2016) Downloads
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