Labor supply effects of long‐term care reform in Germany

Summary Many informal caregivers are of working age, facing the double burden of providing care and working. Negative labor supply effects can severely reduce the comparative cost advantage of informal over formal care arrangements. When designing long‐term care (LTC) policies, it is crucial to unde...

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Bibliographic Details
Published in:Health economics 2018-09, Vol.27 (9), p.1328-1339
Main Authors: Geyer, Johannes, Korfhage, Thorben
Format: Article
Language:English
Subjects:
Caregivers
Clinical outcomes
Economic models
Health economics
Health insurance
Health status
Incentives
Informal care
Insurance policies
Labor market
Labor supply
Long term care insurance
long‐term care
Older men
Older people
Policy making
Quasi-experimental methods
quasi‐experimental approach
Reforms
Trade policy
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Summary:Summary Many informal caregivers are of working age, facing the double burden of providing care and working. Negative labor supply effects can severely reduce the comparative cost advantage of informal over formal care arrangements. When designing long‐term care (LTC) policies, it is crucial to understand the effects not only on health outcomes but also on labor supply behavior of informal caregivers. We evaluate labor supply reactions to the introduction of the German long‐term care insurance in 1995 using a difference‐in‐differences approach. The long‐term care insurance changes the caregivers' trade‐off between labor supply and care provision. The aim of the reform was to strengthen informal care arrangements. We find a strong negative labor supply effect for men but not for women. We argue that the LTC benefits increased incentives for older men to leave the labor market. The results reveal a trade‐off for policy makers that is important for future reforms—in particular for countries that mainly base their LTC system on informal care.
ISSN:1057-9230
1099-1050
DOI:10.1002/hec.3663