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Where Should the Elderly Live and Who Should Pay for Their Care?

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  • Thomas Aronsson
  • Sören Blomquist
  • Luca Micheletto

Abstract

We consider a model with a population consisting of earners and retired persons; elderly care is publicly provided. There is one big city, where congestion effects and agglomeration forces are at work, and a number of small villages. We show how the externalities related to population mobility lead to an inefficient spatial distribution of earners and retirees, and we characterize the second‐best solution. Decentralization of this solution in a fiscal federalism structure requires the use of taxes and subsidies proportional to the number of earners and retired persons living in the city and the villages.

Suggested Citation

  • Thomas Aronsson & Sören Blomquist & Luca Micheletto, 2010. "Where Should the Elderly Live and Who Should Pay for Their Care?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(2), pages 289-314, June.
    • Handle: RePEc:bla:scandj:v:112:y:2010:i:2:p:289-314
    DOI: 10.1111/j.1467-9442.2010.01601.x
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