Long-Run Consequences of Informal Elderly Care and Implications of Public Long-Term Care Insurance

Thorben Korfhage () and Björn Fischer-Weckemann
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Thorben Korfhage: RWI

No 16124, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: pension benefits; retirement; labor supply; long-term care insurance; informal care; long-term care; dynamic structural model (search for similar items in EconPapers)
JEL-codes: I18 I38 J14 J22 J26 (search for similar items in EconPapers)
Pages: 94 pages
Date: 2023-05
New Economics Papers: this item is included in nep-age, nep-hea and nep-lma
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Published - published in: Journal of Health Economics, 2024, 96, 102884

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