Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161084
Authors: 
Canta, Chiara
Cremer, Helmuth
Gahvari, Firouz
Year of Publication: 
2016
Series/Report no.: 
IZA Discussion Papers 10461
Abstract: 
We study the role and design of private and public insurance programs when informal care is uncertain. Children's degree of altruism is randomly distributed over some interval. Social insurance helps parents who receive a low level of care, but it comes at the cost of crowding out informal care. Crowding out occurs both at the intensive and the extensive margins. We consider three types of LTC policies: (i) a topping up (TU) scheme providing a transfer which is non exclusive and can be supplemented; (ii) an opting out (OO) scheme which is exclusive and cannot be topped up and (iii), a mixed policy combining these two schemes. TU will involve crowding out both at the intensive and the extensive margins, whereas OO will crowd out informal care solely at the extensive margin. However, OO is not necessarily the dominant policy as it may exacerbate crowding out at the extensive margin. The distortions of both policies can be mitigated by using an appropriately designed mixed policy.
Subjects: 
long term care
uncertain altruism
private insurance
public insurance
topping up
opting out
JEL: 
H2
H5
Document Type: 
Working Paper

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