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Uncertain altruism and the provision of long term care

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  • Cremer, Helmuth
  • Gahvari, Firouz
  • Pestieau, Pierre

Abstract

When family assistance is uncertain, benefits cannot be conditioned on family aid. We study the role of private and public LTC insurance in this environment and compare the properties and optimality of the topping up versus opting out public insurance schemes. Under topping up, the required LTC is less than full insurance and should be provided publicly unless private insurance market for dependency is fair. With an opting out scheme, there will be three possible equilibria depending on the children's degree of altruism. These imply: full LTC insurance with no aid from children, less than full insurance just enough to induce aid, and full insurance with aid. Fair private insurance can support only the first equilibrium. Opting out policies are self-targeted and dominate topping up schemes when the degree of children's altruism is sufficiently large. However, when the degree of altruism is small the dominance goes in the opposite direction.

Suggested Citation

  • Cremer, Helmuth & Gahvari, Firouz & Pestieau, Pierre, 2017. "Uncertain altruism and the provision of long term care," Journal of Public Economics, Elsevier, vol. 151(C), pages 12-24.
    • Handle: RePEc:eee:pubeco:v:151:y:2017:i:c:p:12-24
    DOI: 10.1016/j.jpubeco.2017.05.001
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    More about this item

    Keywords

    Long term care; Uncertain altruism; Private insurance; Public insurance; Topping up; Opting out;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H5 - Public Economics - - National Government Expenditures and Related Policies

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