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

94 Pages Posted: 13 May 2023

See all articles by Thorben Korfhage

Thorben Korfhage

RWI – Leibniz Institute for Economic Research

Bjoern Fischer

ZEW Mannheim

Multiple version iconThere are 2 versions of this paper


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: long-term care, informal care, long-term care insurance, labor supply, retirement, pension benefits, dynamic structural model

JEL Classification: I18, I38, J14, J22, J26

Suggested Citation

Korfhage, Thorben and Fischer, Bjoern, Long-Run Consequences of Informal Elderly Care and Implications of Public Long-Term Care Insurance. IZA Discussion Paper No. 16124, Available at SSRN: https://ssrn.com/abstract=4447085 or http://dx.doi.org/10.2139/ssrn.4447085

Thorben Korfhage (Contact Author)

RWI – Leibniz Institute for Economic Research ( email )

Hohenzollernstr. 1-3
Essen, 45128

Bjoern Fischer

ZEW Mannheim ( email )


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