Reforming Long-Term Care in Germany: A Simulation Study

Hans Fehr () and Gitte Halder

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2006, vol. 52, issue 1, 75-98

Abstract: The present study quanti?es the revenue and distributional effects of various reform options for the German long-term care system. Starting from a baseline path of the economy which represents the existing public and private mixture of the German long-term care system, we either switch to a pay-as-you-go ?nanced citizen premium or alternative funded systems of long-term care. Our simulations indicate three central policy implications of the discussed reform models. First, the citizen premium model has negligible labor market effects while a move to a funded system improves employment significantly in the long run. Second, while the citizen premium model mainly redistributes within generations, all models with funded premiums mainly redistribute across generations. Third, a delayed elimination of the pay-as-you-go system as proposed by the Herzog commission might be preferred to an immediate funding strategy since the former smoothes the short-run redistributive e?ects while keeping the long run gains of future generations.

Keywords: CGE models; long-term care reform in Germany (search for similar items in EconPapers)
JEL-codes: D58 H22 J11 (search for similar items in EconPapers)
Date: 2006
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