Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/65850 
Full metadata record
Appears in Collections:
DC FieldValueLanguage
dc.contributor.authorDe Donder, Philippeen
dc.contributor.authorLeroux, Marie-Louiseen
dc.date.accessioned2012-11-01-
dc.date.accessioned2012-11-02T17:10:54Z-
dc.date.available2012-11-02T17:10:54Z-
dc.date.issued2012-
dc.identifier.urihttp://hdl.handle.net/10419/65850-
dc.description.abstractWe build a political economy model where individuals differ in the extent of the behavioral bias they exhibit when voting first over social long-term care (LTC) insurance and then choosing the amount of LTC annuities. LTC annuities provide a larger return if dependent than if healthy. We study the majority voting equilibrium under three types of behavioral biases: myopia, optimism and sophisticated procrastination. Optimists and myopics similarly under-estimate their own dependency risk both when voting and when buying LTC annuities. They differ in that optimists know the correct average dependency risk (that determines the return of both social and private insurance), while myopics also under-estimate this average risk (and thus over-estimate the insurance return). Sophisticated procrastinators act as if they under-estimated their own risk when buying annuities, but anticipate this bias at the time of voting. We obtain that the stylized observation of lack of LTC insurance is compatible with agents being optimistic or myopic, but not sophisticated procrastinators. Increasing the difference in return across dependency states for the LTC annuity is detrimental to sophisticated voters and to very biased myopic and optimist voters. Finally, less myopic individuals may end up worse off, at the majority-voting equilibrium, than more myopic agents, casting some doubt on the usefulness of information campaigns.en
dc.language.isoengen
dc.publisher|aCenter for Economic Studies and ifo Institute (CESifo) |cMunichen
dc.relation.ispartofseries|aCESifo Working Paper |x3972en
dc.subject.jelH55en
dc.subject.jelI13en
dc.subject.jelD91en
dc.subject.ddc330en
dc.subject.keywordmajority votingen
dc.subject.keywordmyopiaen
dc.subject.keywordoptimismen
dc.subject.keywordsophisticated procrastinatorsen
dc.subject.keyworddependency linked annuityen
dc.subject.keywordenhanced life annuityen
dc.subject.keywordcomplementary private insuranceen
dc.titleBehavioral biases and long term care annuities: A political economy approach-
dc.typeWorking Paperen
dc.identifier.ppn72906977Xen
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen

Files in This Item:
File
Size
448.22 kB





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