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Long-term Care Insurance and Carers' Labor Supply – A Structural Model

Author

Listed:
  • Geyer, J.
  • Korfhage, T.

Abstract

Germany introduced a new mandatory insurance scheme for long-term care in 1995. From a budgetary perspective family care is a cost-saving alternative to formal home care and to stationary nursing care. Thus, one of the goals of the insurance is to support informal care provided by family members. However, the opportunity costs resulting from reduced labor supply of the carer are often overlooked. We focus on the labor supply decision of carers and the incentives set by the long-term care insurance. Care recipients can chose between benefits in kind and benefits in cash. We estimate a structural model of labor supply and the choice of benefits of caring spouses. We find that benefits in kind have positive effects on labor supply, while for benefits in cash elasticities are negative but not statistically significant. If both types of benefits are increased proportionately, demand for formal care increases. Labor supply is only adjusted by men, but not by women.

Suggested Citation

  • Geyer, J. & Korfhage, T., 2014. "Long-term Care Insurance and Carers' Labor Supply – A Structural Model," Health, Econometrics and Data Group (HEDG) Working Papers 14/14, HEDG, c/o Department of Economics, University of York.
    • Handle: RePEc:yor:hectdg:14/14
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    Cited by:

    1. Johannes Geyer & Thorben Korfhage, 2018. "Labor supply effects of long‐term care reform in Germany," Health Economics, John Wiley & Sons, Ltd., vol. 27(9), pages 1328-1339, September.
    2. Geyer, Johannes & Korfhage, Thorben, 2015. "Long-term care reform and the labor supply of household members: Evidence from a quasi-experiment," Ruhr Economic Papers 574, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    3. Ludovico Carrino & Vahé Nafilyan & Mauricio Avendano, 2023. "Should I Care or Should I Work? The Impact of Work on Informal Care," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 42(2), pages 424-455, March.
    4. Gabrielle Pepin & Yulya Truskinovsky, 2023. "Not Just for Kids: Child and Dependent Care Credit Benefits for Adult Care," Upjohn Working Papers 23-381, W.E. Upjohn Institute for Employment Research.
    5. Ando Michihito & Furuichi Masato & Kaneko Yoshihiro, 2021. "Does universal long-term care insurance boost female labor force participation? Macro-level evidence," IZA Journal of Labor Policy, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 11(1), pages 1-50, May.
    6. Costa-Font, Joan & Vilaplana-Prieto, Cristina, 2022. "Mental health effects of caregivers respite: Subsidies or Supports?," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    7. Victoria Levin & Ana Maria Munoz Boudet & Beth Zikronah Rosen & Tami Aritomi & Julianna Flanagan & Lourdes Rodriguez-Chamussy, 2015. "Why Should We Care about Care?," World Bank Publications - Reports 29545, The World Bank Group.
    8. Korfhage, Thorben, 2019. "Long-run consequences of informal elderly care and implications of public long-term care insurance," Ruhr Economic Papers 813, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    9. Costa-Font, Joan & Jiménez-Martín, Sergi & Vilaplana-Prieto, Cristina, 2022. "Do Public Caregiving Subsidies and Supports affect the Provision of Care and Transfers?," Journal of Health Economics, Elsevier, vol. 84(C).
    10. Johannes Geyer & Peter Haan & Thorben Korfhage, 2015. "Indirect Fiscal Effects of Long-Term Care Insurance," Discussion Papers of DIW Berlin 1520, DIW Berlin, German Institute for Economic Research.
    11. Geyer, Johannes, 2020. "Notes about Comparing Long-Term Care Expenditures across Countries. Comment on "Financing Long-Term Care: Lessons from Japan"," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 9(2), pages 80-82.
    12. Guo, Miao & Li, Yang & Zhang, Wendan, 2025. "Supply expansion of Long-Term Services & Supports: Evidence from China’s long-term care insurance pilot," Journal of Economic Behavior & Organization, Elsevier, vol. 239(C).
    13. Fischer, Björn & Müller, Kai-Uwe, 2020. "Time to care? The effects of retirement on informal care provision," Journal of Health Economics, Elsevier, vol. 73(C).
    14. Nicolas R. Ziebarth, 2018. "Social Insurance and Health," Contributions to Economic Analysis, in: Health Econometrics, volume 127, pages 57-84, Emerald Group Publishing Limited.
    15. Yang, Tianli & Zhao, Zhong, 2025. "Long-term care insurance policy and the development of elderly care enterprises in China," China Economic Review, Elsevier, vol. 94(PB).
    16. Schmitz, Hendrik & Westphal, Matthias, 2017. "Informal care and long-term labor market outcomes," Journal of Health Economics, Elsevier, vol. 56(C), pages 1-18.
    17. Fischer, Björn & Haan, Peter & Sanchez, Santiago Salazar, 2022. "The effect of unemployment on care provision," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    18. Minamo MIKOSHIBA, 2025. "Universal Insurance with In-kind Transfers: The welfare effects of long-term care insurance in Japan," Discussion papers 25030, Research Institute of Economy, Trade and Industry (RIETI).
    19. Julien Bergeot, 2024. "Care for elderly parents: do children cooperate?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 37(1), pages 1-31, March.
    20. Geyer, J.; Korfhage, T.;, 2017. "Long-term care reform and the labor supply of informal caregivers – evidence from a quasi-experiment," Health, Econometrics and Data Group (HEDG) Working Papers 17/20, HEDG, c/o Department of Economics, University of York.
    21. Jessen, Robin & König, Johannes, 2018. "Hours risk, wage risk, and life-cycle labor supply," Ruhr Economic Papers 771, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    22. Kim, Hoolda & Mitra, Sophie, 2022. "The Economic and Health Effects of Long-Term Care Insurance: New Evidence from Korea," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    23. Heger, Dörte & Korfhage, Thorben, 2016. "Care choices in Europe: To each according to his needs?," Ruhr Economic Papers 649, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    24. Schröder Carsten & König Johannes & Fedorets Alexandra & Goebel Jan & Grabka Markus M. & Lüthen Holger & Metzing Maria & Schikora Felicitas & Liebig Stefan, 2020. "The economic research potentials of the German Socio-Economic Panel study," German Economic Review, De Gruyter, vol. 21(3), pages 335-371, September.

    More about this item

    Keywords

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I13 - Health, Education, and Welfare - - Health - - - Health Insurance, Public and Private

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