Cluster-Seminar Public Finances and Living Conditions

In this paper, we estimate a structural dynamic discrete choice model of informal as well as formal care provision, retirement and labor supply. The model allows to assess the dynamic consequences of providing informal care or organizing formal care for parents, e.g., due to reduced wages, pension benefits, or benefits from long-term care insurance. Further, it allows to analyze counterfactual policy reforms of the public retirement insurance such as increased benefits or a higher legal retirement age on care provision and the care mix. Thereby, we highlight policymakers' trade-offs between retaining labor supply and long-term care for the elderly against the trend of demographic aging.