Long-Term Care Reform and the Labor Supply of Household Members – Evidence from a Quasi-Experiment

50 Pages Posted: 22 Dec 2015

See all articles by Johannes Geyer

Johannes Geyer

German Institute for Economic Research (DIW Berlin)

Thorben Korfhage

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

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Date Written: August 21, 2015

Abstract

Germany introduced a new mandatory insurance for long-term care in 1995 as part of its social security system. It replaced a system based on means tested social welfare. Benefits from the long-term care insurance are not means tested and depend on the required level of care. The insurance provides both benefits in kind and cash benefits. The new scheme improved the situation for households to organize informal care at home. This was one goal of the reform since policymakers view informal care as a cost-saving alternative to formal care. This view however neglects possible opportunity costs of reduced labor supply of carers. We exploit this reform as a quasi-experiment and examine its effect on the labor supply of caregivers who live in the same household as the care recipient. We find strong negative labor market effects for men but not for women. We conduct a series of robustness tests and find results to be stable.

Keywords: Labor supply; long-term care; long-term care insurance; natural experiment; quasi-experiment

JEL Classification: J22, H31, I13

Suggested Citation

Geyer, Johannes and Korfhage, Thorben, Long-Term Care Reform and the Labor Supply of Household Members – Evidence from a Quasi-Experiment (August 21, 2015). Available at SSRN: https://ssrn.com/abstract=2706538 or http://dx.doi.org/10.2139/ssrn.2706538

Johannes Geyer

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

Mohrenstraße 58
Berlin, 10117
Germany

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

Thorben Korfhage (Contact Author)

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

Hohenzollernstr. 1-3
Essen, 45128
Germany

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