Indirect Fiscal Effects of Long-Term Care Insurance

Informal care by close family members is the main pillar of most long-term care systems. However, due to demographic ageing, the need for long-term care is expected to increase while the informal care potential is expected to decline. From a budgetary perspective, informal care is often viewed as a...

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Bibliographic Details
Published in:Fiscal studies 2017-09, Vol.38 (3), p.393-415
Main Authors: Geyer, Johannes, Haan, Peter, Korfhage, Thorben
Format: Article
Language:English
Subjects:
Aging
Caregivers
Economic models
fiscal effects
formal care
H31
Health insurance
I13
Informal care
Insurance policies
J22
Labor supply
labour supply
Long term
Long term care insurance
Long term health care
Payments
Population aging
Relatives
Social security
structural model
Tax revenues
Taxation
Transfer payments
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Summary:Informal care by close family members is the main pillar of most long-term care systems. However, due to demographic ageing, the need for long-term care is expected to increase while the informal care potential is expected to decline. From a budgetary perspective, informal care is often viewed as a cost-saving alternative to subsidised formal care. This view, however, neglects that many family carers are of working age and face the difficulty of reconciling care and paid work, which might entail sizeable indirect fiscal effects related to forgone tax revenues, lower social security contributions and higher transfer payments. In this paper, we use a structural model of labour supply and the choice of care arrangement to quantify these indirect fiscal effects of informal care. Moreover, based on the model, we discuss the fiscal effects related to non-take-up of formal care.
ISSN:0143-5671
1475-5890
DOI:10.1111/j.1475-5890.2017.12140