Working Paper: CEPR ID: DP12993
Authors: Chiara Canta; Helmuth Cremer
Abstract: We study the design of public long-term care (LTC) insurance when the altruism of informal caregivers is uncertain. We consider non-linear policies where the LTC benefit depends on the level of informal care, which is assumed to be observable while children's altruism is not. The traditional topping up and opting out policies are special cases of ours. Both total and informal care should increase with the children's level of altruism. This obtains under full and asymmetric information. Social LTC, on the other hand, may be non-monotonic. Under asymmetric information, social LTC is lower than its full information level for the lowest level of altruism, while it is distorted upward for the higher level of altruism. This is explained by the need to provide incentives to high-altruism children. The implementing contract is always such that social care increases with formal care.
Keywords: long term care; uncertain altruism; private insurance; public insurance; topping up; opting out
JEL Codes: H2; H5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| children's altruism (D64) | informal care (J46) |
| informal care (J46) | social LTC insurance (G52) |
| children's altruism (D64) | social LTC insurance (G52) |
| high levels of altruism (D64) | social LTC distortion (H31) |