Long term care: the state and the family

Abstract : In this paper we study the optimal design of a long term care policy in a setting that includes two types of care to dependent parents: financial assistance and assistance in time by children. The instruments are subsidies to aiding children, financed by a flat tax on earnings. The only source of heterogeneity is children's productivity. Parents can influence their children by leaving them gifts before they know whether or not they will need long term care, yet knowing the productivity of the children. The tax-transfer policy is shown to depend on its effect on parental gifts, on children's labor supply, on the distribution of wages and on consumption inequality between parents and children and between children having dependent parents and children having healthy parents.
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Pierre Pestieau, Motohiro Sato. Long term care: the state and the family. Annales d'Economie et de Statistique, INSEE-GENES, 2006, pp.151-166. ⟨halshs-00754143⟩

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