Labor supply effects of long‐term care reform in Germany. (26th April 2018)

• Record Type: Journal Article
• Authors: Geyer, Johannes; Korfhage, Thorben
• Is Part Of: Health economics. Volume 27:Number 9(2018)
• Page Start: 1328
• Page End: 1339
• Publication Date: 2018-04-26
• Subjects: labor supply -- long‐term care -- long‐term care insurance -- quasi‐experimental approach; Medical economics -- Periodicals; Economics, Medical -- Periodicals; Health Care Costs -- Periodicals; Health Policy -- economics -- Periodicals; Health Services -- economics -- Periodicals; 362.1
• DOI: 10.1002/hec.3663
• Languages: English
• ISSNs: 1057-9230

Abstract

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.