Indirect Fiscal Effects of Long-Term Care Insurance

31 Pages Posted: 2 Dec 2015

See all articles by Johannes Geyer

Johannes Geyer

German Institute for Economic Research (DIW Berlin)

Peter Haan

DIW Berlin, German Institute for Economic Research; IZA Institute of Labor Economics

Thorben Korfhage

Rhine-Westphalia Institute for Economic Research (RWI-Essen)

Multiple version iconThere are 2 versions of this paper

Date Written: September 8, 2015

Abstract

Informal care by close family members is the main pillar of most longterm care systems. However, due to demographic ageing the need for long-term care is expected to increase while the informal care potential is expected to decline. From a budgetary perspective, informal care is often viewed as a cost-saving alternative to subsidized formal care. This view, however neglects that many family carers are of working age and face the difficulty to reconcile care and paid work which might entail sizable indirect fiscal effects related to forgone tax revenues, lower social security contributions and higher transfer payments. In this paper we use a structural model of labor supply and the choice of care arrangement to quantify these indirect fiscal effects of informal care. Moreover based on the model we discuss the fiscal effects related to non-take up of formal care.

Keywords: labor supply, long-term care, long-term care insurance, structural model

JEL Classification: J22, H31, I13

Suggested Citation

Geyer, Johannes and Haan, Peter and Korfhage, Thorben, Indirect Fiscal Effects of Long-Term Care Insurance (September 8, 2015). DIW Berlin Discussion Paper No. 1520, Available at SSRN: https://ssrn.com/abstract=2698018 or http://dx.doi.org/10.2139/ssrn.2698018

Johannes Geyer (Contact Author)

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

HOME PAGE: http://www.diw.de/programme/jsp/MA.jsp?uid=jgeyer&language=en

Peter Haan

DIW Berlin, German Institute for Economic Research ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Thorben Korfhage

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

Hohenzollernstr. 1-3
Essen, 45128
Germany

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