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

Thorben Korfhage and Björn Fischer-Weckemann

No 23-030, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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.

Keywords: long-term care; informal care; long-term care insurance; labor supply; retirement; pension benefits; dynamic structural model (search for similar items in EconPapers)
JEL-codes: I18 I38 J14 J22 J26 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-age, nep-eur and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:23030

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