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

Thorben Korfhage and Björn Fischer-Weckemann

Journal of Health Economics, 2024, vol. 96, issue C

Abstract: We estimate a dynamic structural model of labor supply, retirement, and informal caregiving to study short and long-term costs of informal caregiving in Germany. 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 while public long-term care insurance policies are fiscally costly and induce negative labor market effects, they can largely offset the personal costs of caregiving and increase welfare, 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: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jhecon:v:96:y:2024:i:c:s0167629624000298

DOI: 10.1016/j.jhealeco.2024.102884

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