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Old age support in kind

Published online by Cambridge University Press:  21 July 2009

KAZUTOSHI MIYAZAWA
KAZUTOSHI MIYAZAWA
Affiliation:
Faculty of Economics, Doshisha University, Kamigyo, Kyoto 6028580, Japan (e-mail: [email protected])
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Abstract

It has been argued whether a transfer policy for elderly people should be in kind or in cash. This paper presents a rationale to answer the question in an endogenous growth model with a two-way intrafamily transfer in middle age, education for the child as an inter-vivos transfer, and informal parental care in exchange for a bequest. We have two analytical results. First, a transfer in cash, such as a public pension, prevents economic growth because a strategic behavior concerning caregiving generates a disincentive effect on education. Second, a transfer in kind, such as public formal care, promotes economic growth because the valuation of the service generates an additional benefit of education, which dominates the disincentive effect. Our results show that old age support should be in kind rather than in cash in the context of economic growth and also welfare if bequests are strategic.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 9 , Issue 3 , July 2010 , pp. 445 - 472
Copyright
Copyright © Cambridge University Press 2009

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