Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110881
Authors: 
De Donder, Philippe
Leroux, Marie-Louise
Year of Publication: 
2015
Series/Report no.: 
CESifo Working Paper 5384
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.
Subjects: 
majority voting
local Condorcet winner
crowding out
intrinsic preference for informal help
tax reform
JEL: 
H55
I13
D91
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.