Caregiving subsidies and spousal early retirement intentions

Abstract

Balancing caregiving duties and employment can be both financially and emotionally burdensome, especially when care is provided to a spouse at home. Caregiving subsidies can play a role in helping caregivers to cope with such duties. This paper demonstrates how providing financial respite for caregivers can influence individuals' decisions to retire early. We investigate the impact of a reform that extended long-term care (LTC) benefits (in the form of subsidies and supports) on the intention of a caregiving spouse to retire early in Spain. We subsequently examine the effect of austerity spending cuts reducing such publicly funded benefits, and we compare the estimates to the effects of an early retirement reform among private sector workers around the same time. Our preferred estimates suggest evidence of a 10pp reduction in early retirement intentions after the extension of LTC benefits even though the effect is heterogeneous by type of benefit. Consistently, austerity spending cuts in benefits are found to weaken retirement intentions. Even more importantly, our estimates suggest that cuts in caregiving subsidies exert a much stronger effect on early retirement intentions than actual early retirement reforms.