Korfhage, Thorben

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.

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.