Private, social and self insurance for long-term care in the presence of family help

Abstract

We study the political determination of the level of social long-term care insurance when voters can top up with private insurance, saving and family help. Agents differ in income, probability of becoming dependent and of receiving family help, and amount of family help received. Social insurance redistributes across income and risk levels, while private insurance is actuarially fair. The income-to-dependency probability ratio of agents determines whether they prefer social or private insurance. Family support crowds out the demand for both social and, especially, private insurance, as strong prospects of family help drive the demand for private insurance to zero. The availability of private insurance decreases the demand for social insurance but need not decrease its majority chosen level. A majority of voters would oppose banning private insurance.

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JEL codes

Replaces

Philippe De Donder, and Pierre Pestieau, “Private, social and self insurance for longterm care: a political economy analysis”, IDEI Working Paper, n. 719, December 2011, revised June 2014.

Philippe De Donder, and Pierre Pestieau, “Private, social and self insurance for longterm care: a political economy analysis”, TSE Working Paper, n. 11-305, December 2011, revised June 2014.

Reference

Philippe De Donder, and Pierre Pestieau, “Private, social and self insurance for long-term care in the presence of family help”, Journal of Public Economic Theory, vol. 19, n. 1, February 2017, pp. 18–37.