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How does education influence individuals' use of bequests as a long-term care insurance?

Authors
  • Ribes, Edouard
  • Cerna, Mines
Publication Date
Dec 21, 2021
Source
HAL-Mines ParisTech
Keywords
Language
English
License
Unknown
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Abstract

This paper proposes a simple economic model describing retirees' use of bequests. The model assumes that retirees need long term care and have preferences regarding the source of this support. Support can either be bought from the market (at a fixed rate) or sourced from within their family and compensated through bequests. When calibrated, the model shows that for individuals to get at least 1h of daily care, they must, independently of their education level, save about 20% of their pension in the early years of their retirement. However, differences in the source of support appear between non educated and educated households. It is indeed much easier to get support from family members in non-educated households compared to educated ones. Those results suggest that non educated households are also less likely to contract financial insurance products for long term care as they can easily leverage informal arrangements (i.e. their family).

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