Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents

40 Pages Posted: 20 Jul 2006 Last revised: 9 Oct 2022

See all articles by Liliana E. Pezzin

Liliana E. Pezzin

Medical College of Wisconsin - Department of Medicine

Robert A. Pollak

Washington University in St. Louis - John M. Olin Business School; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Barbara Steinberg Schone

U.S. Department of Health and Human Services - Center for Cost and Financing Studies - Agency for Health Care Policy & Research (AHCPR); Georgetown Public Policy Institute

Multiple version iconThere are 3 versions of this paper

Date Written: July 2006

Abstract

In this paper, we use a two-stage bargaining model to analyze the living arrangement of a disabled elderly parent and the assistance provided to the parent by her adult children. The first stage determines the living arrangement: the parent can live in a nursing home, live alone in the community, or live with any child who has invited coresidence. The second stage determines the assistance provided by each child in the family. Working by backward induction, we first calculate the level of assistance that each child would provide to the parent in each possible living arrangement. Using these calculations, we then analyze the living arrangement that would emerge from the first stage game. A key assumption of our model is that family members cannot or will not make binding agreements at the first stage regarding transfers at the second stage. Because coresidence is likely to reduce the bargaining power of the coresident child relative to her siblings, coresidence may fail to emerge as the equilibrium living arrangement even when it is Pareto efficient. That is, the outcome of the two-stage game need not be Pareto efficient.

Suggested Citation

Pezzin, Liliana E. and Pollak, Robert A. and Steinberg Schone, Barbara, Efficiency in Family Bargaining: Living Arrangements and Caregiving Decisions of Adult Children and Disabled Elderly Parents (July 2006). NBER Working Paper No. w12358, Available at SSRN: https://ssrn.com/abstract=917563

Liliana E. Pezzin

Medical College of Wisconsin - Department of Medicine ( email )

8701 Watertown Plank Road
Milwaukee, WI WI 53226
United States

Robert A. Pollak (Contact Author)

Washington University in St. Louis - John M. Olin Business School ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States
314-935-4918 (Phone)
314-935-6359 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Barbara Steinberg Schone

U.S. Department of Health and Human Services - Center for Cost and Financing Studies - Agency for Health Care Policy & Research (AHCPR) ( email )

2101 E. Jefferson St., Suite 500
Rockville, MD 20852
United States
301-594-1406, ext. 1470 (Phone)
301-594-2166 (Fax)

Georgetown Public Policy Institute ( email )

3520 Prospect Street, NW
Washington, DC 20007
United States
202 687 1147 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
40
Abstract Views
1,906
PlumX Metrics