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Long-run consequences of informal elderly care and implications of public long-term care insurance

Author

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  • Korfhage, Thorben
  • Fischer-Weckemann, Björn

Abstract

We estimate a dynamic structural model of labor supply, retirement, and informal care supply, incorporating labor market frictions and the German tax and benefit system. We find that in the absence of Germany's public long-term insurance scheme, informal elderly care has adverse and persistent effects on labor market outcomes and, thus, negatively affects lifetime earnings and future pension benefits. These consequences of caregiving are heterogeneous and depend on age, previous earnings, and institutional regulations. Policy simulations suggest that public long-term care insurance policies are fiscally costly and induce negative labor market effects. But we also show that they can offset the personal costs of caregiving to a large extent and increase welfare for those providing care, especially for low-income individuals.

Suggested Citation

  • Korfhage, Thorben & Fischer-Weckemann, Björn, 2023. "Long-run consequences of informal elderly care and implications of public long-term care insurance," ZEW Discussion Papers 23-030, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:23030
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    More about this item

    Keywords

    long-term care; informal care; long-term care insurance; labor supply; retirement; pension benefits; dynamic structural model;
    All these keywords.

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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