Long Term Care: The State, the Market and the Family

CORE Discussion Paper No. 2004/82

24 Pages Posted: 15 Apr 2005

See all articles by Pierre Pestieau

Pierre Pestieau

University of Liège - Research Center on Public and Population Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE)

Motohiro Sato

Hitotsubashi University - Faculty of Economics

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Date Written: December 2004

Abstract

In this paper we study the optimal design of a long term care policy in a setting that includes three types of care to dependent parents: public nursing homes, financial assistance by children and assistance in time by children. The instruments are public nursing homes and subsidies to aiding children, both financed by a flat tax on earnings. The only source of heterogeneity is children's productivity. Parents can influence their children by leaving them gifts before they know whether or not they will need long term care, yet knowing the productivity of the children. We show that the quality of nursing homes and the level of tax-transfer depend on their effect on gifts, the distribution of wages and the various inequalities in consumption. We also consider the possibility of private insurance.

Keywords: long term care, altruism, bequests

JEL Classification: D64, H55, I118

Suggested Citation

Pestieau, Pierre and Sato, Motohiro, Long Term Care: The State, the Market and the Family (December 2004). CORE Discussion Paper No. 2004/82, Available at SSRN: https://ssrn.com/abstract=688901 or http://dx.doi.org/10.2139/ssrn.688901

Pierre Pestieau (Contact Author)

University of Liège - Research Center on Public and Population Economics ( email )

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Centre for Economic Policy Research (CEPR)

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CESifo (Center for Economic Studies and Ifo Institute)

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HOME PAGE: http://www.CESifo.de

Catholic University of Louvain (UCL) - Center for Operations Research and Econometrics (CORE) ( email )

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Louvain la Neuve
Belgium

Motohiro Sato

Hitotsubashi University - Faculty of Economics ( email )

Tokyo, 186-8601
Japan

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