The Political Choice of Social Long Term Care Transfers When Family Gives Time and Money

36 Pages Posted: 9 Jun 2015

See all articles by Philippe De Donder

Philippe De Donder

University of Toulouse 1 - Toulouse School of Economics (TSE)

M.‐L. Leroux

University of Quebec at Montreal (UQAM)

Date Written: May 31, 2015

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 help in time or money to their dependent parent. Dependent parents have an intrinsic preference for help in time by family members. We first show that low (resp., high) income children provide help in time (resp. in money), 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 help in time by the family when the intrinsic preference of dependent parents for the latter 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

JEL Classification: H550, I130, D910

Suggested Citation

De Donder, Philippe and Leroux, Marie-Louise, The Political Choice of Social Long Term Care Transfers When Family Gives Time and Money (May 31, 2015). CESifo Working Paper Series No. 5384, Available at SSRN: https://ssrn.com/abstract=2615770

Philippe De Donder

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Marie-Louise Leroux (Contact Author)

University of Quebec at Montreal (UQAM) ( email )

PB 8888 Station DownTown
Succursale Centre Ville
Montreal, Quebec H3C3P8
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
26
Abstract Views
333
PlumX Metrics