Long-term care and capital accumulation: the impact of the State, the market and the family
Abstract
The rising level of long-term care (LTC) expenditures and their financing sources are likely to impact savings and capital accumulation and henceforth the pattern of growth. This paper studies how the joint interaction of the family, the market and the State influences capital accumulation and welfare in a society in which the assistance the children give to dependent parents is triggered by a family norm. We find that with a family norm in place, the dynamics of capital accumulation differ from those of a standard Diamond (Am Econ Rev 55:1126–1150, 1965) model with dependence. For instance, if the family help is sizeably more productive than other LTC financing sources, pay-as-you-go social insurance might be a complement to private insurance and foster capital accumulation.