Long-Term Care Insurance and Carers' Labor Supply: A Structural Model

Abstract

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Labor supply effects of long‐term care reform in Germany

“…Benefits in kind substitute informal care, which enables family carers to increase labor supply and leisure (Bonsang, 2009;Geyer & Korfhage, 2015). By increasing nonlabor income, benefits in cash induce negative labor supply incentives.…”

Indirect Fiscal Effects of Long-Term Care Insurance

“…For the analysis of the indirect fiscal effects of formal LTC, we propose a structural model similar to that of Geyer and Korfhage (2015), which explains jointly the decision about the care arrangement and labour supply. 23 As mentioned above, the structural model focuses on working-age carers who live together with the person in need of care, most often their partner or parent, and who are most likely the main caregiver.…”

“…It also allows the modelling of non-linearities in the budget constraint related to the tax-benefit system. For more details, including further references to other relevant structural models of care arrangement and labour supply, see Geyer and Korfhage (2015). The hours categories include non-working (0 hours), part-time work (19 hours) and full-time work (41 hours).…”

“…Similarly to van Soest (1995), Aaberge, Dagsvik and Strøm (1995) and Blundell et al (2000), we model the labour supply decision in a discrete choice setting and, following Geyer and Korfhage (2015), we include the choice of care arrangement. 11 In more detail, the household can choose between informal and formal care and between part-time, full-time or no employment for the caregiver.…”

“…In addition, in Germany, informal care by co-residents is by far the most common care arrangement. 11 In their analysis, Geyer and Korfhage (2015) focus on the labour supply effects of long-term insurance but do not analyse the fiscal effects. 10 Geyer, Korfhage andSchulz, 2013.…”