Social long-term care insurance with two-sided altruism

Abstract

This paper studies the design of a social long-term care (LTC) insurance when altruism is two-sided. The laissez-faire solution is not efficient, unless there is perfect altruism. Under full information, the rst-best can be decentralized by a linear subsidy on informal aid, a linear tax on bequests when the parent is dependent and state specic lump-sum transfers which provide insurance. We also study a second-best scheme comprising a LTC benet, a payroll tax on childrens earnings and an inheritance tax. This scheme redistributes resources across individuals and between the states of nature and the tax on childrens labor enhances informal care to compensate for the childrens possible less than full altruism.

Keywords

JEL codes

Replaced by

Helmuth Cremer, Pierre Pestieau, and Kerstin Roeder, “Social long-term care insurance with two-sided altruism”, Research in Economics, vol. 70, 2016, pp. 101–109.

Reference

Helmuth Cremer, Pierre Pestieau, and Kerstin Roeder, “Social long-term care insurance with two-sided altruism”, TSE Working Paper, n. 15-593, July 2015.