In this paper, I estimate a dynamic structural model of labor supply, retirement, and informal care supply, incorporating labor market frictions and the German tax and beneﬁt system. I ﬁnd that informal elderly care has adverse and persistent effects on labor market outcomes and therefore negatively affects lifetime earnings, future pension beneﬁts, and individuals’ well-being. These consequences of caregiving are heterogeneous and depend on age, previous earnings, and institutional regulations. Policy simulations suggest that, even though ﬁscally costly, public long-term care insurance can offset the personal costs of caregiving to a large extent – in particular for low-income individuals.
Keywords: long-term care; informal care; long-term care insurance; labor supply; retirement; pension beneﬁts; structural model