Research

Increasing employment and family care? A structural analysis of pension and long-term care policy reforms , joint work with Thorben Korfhage (German Federal Ministry of Finance). Awarded with the BeNA Innovative Research Award 2021: 

Abstract: I develop a comprehensive life-cycle model of elder parent care and work to evaluate options that address pressing conflicts between pension and long-term care (LTC) policies. Many OECD countries react to challenges of demographic change by increasing LTC by family members (informal care) and raising retirement ages. This intensifies conflicts between paid employment and informal care provision. I extend the previous literature, integrating formal and informal care options to point to impacts of institutionalized incentives on the care-mix. I combine endogenous with exogenous processes and improve on earlier models by incorporating important information on parents to model care-demand. I validate the model using a quasi-experimental setting in Germany. Policy simulations show a decrease in informal care supply as retirement ages are increased. Even though formal and informal care are no perfect substitutesin the model, the demand for formal care increases as a consequence. Further, women with potential care-demand suffer higher reductions in life-time earnings as well as welfare. Policy simulations suggest that pension points collected in times of informal care supply reduce detrimental effects of changes to pension rules on informal care supply and the care-mix. These policies can also reduce losses in welfare and life-time earnings for women with potential care-demand. Labor market frictions matter in the uptake of informal care. Our simulations show that removing these have similar positive effects on the care system while reducing labor supply. 

Long run consequences of informal elderly care and implications of public long-term care insurance, joint work with Thorben Korfhage, Journal of Health Economics , 102884  (Accepted 19 April 2024, Available online 3 May 2024 )

Abstact: We estimate a dynamic structural model of labor supply, retirement, and informal care supply, incorporating labor market frictions and the German tax and benefit system. We find that in the absence of Germany’s public long-term insurance scheme, informal elderly care has adverse and persistent effects on labor market outcomes and, thus, negatively affects lifetime earnings and future pension benefits. These consequences of caregiving are heterogeneous and depend on age, previous earnings, and institutional regulations. Policy simulations suggest that public long-term care insurance policies are fiscally costly and induce negative labor market effects. But we also show that they can offset the personal costs of caregiving to a large extent and increase welfare for those providing care, especially for low-income individuals. 

The Effect of Increasing the Early Retirement Age on Household Savings and Consumption Before Retirement, joint work with Stefan Etgeton and Han Ye,  Journal of Public Economics Volume 221, May 2023, 104845 

Abstact: This paper examines how middle-aged households’ savings and consumption expenditure respond to an anticipated three-year increase in the early retirement age (ERA). We use an RD-DD design to examine the 1999 pension reform in Germany, which increased the ERA for women born after 1951 by at least three years. Using the German Income and Consumption Survey, we find a negative impact on private savings of 0.6 percentage points, which is driven by married households. We show that households consisting of highly educated women and homeowners are more likely to reduce their savings rates. Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable household income. Our findings show that the treated households absorb the pension wealth shock without increasing their savings. 

Time to care? The effects of retirement on informal care provision, joint work with Kai-Uwe Müller, Journal of Health Economics 73 (2020): 102350.

Abstract: This paper analyzes the impact of women's retirement on their informal care provision. Using SOEP data, we address fundamental endogeneity problems by exploiting variation in the German pension system in two complementary ways. We find a significant effect of retirement on informal care provision, when using early retirement age thresholds as instruments. Heterogeneity analyses confirm the underlying behavioral mechanism, a time conflict between labor supply and informal care. We further exploit a sizable increase in the early retirement age for German women and find that affected women provide less non-intensive care. High intensity care is not impacted, which leads to a double burden and potentially negative health effects for caregivers. Exploiting the policy reform, we find evidence supporting the notion that formal care is no substitute for informal care. This implies that less overall care is received, which can be damaging to the health of the recipients of care. 

The effect of unemployment on care provision, joint work with Peter Haan and Santiago Salazar Sanchez, The Journal of the Economics of Ageing (2022): 100395

Abstract: In this paper we estimate the effect of unemployment on informal care provision. For the identification we use plant closures as a source of exogenous variation and combine difference-in-differences with matching based on entropy balancing. The analysis is based on data from the German Socio-Economic Panel (SOEP). We find that there is a time conflict between employment and informal care provision. Unemployment increases the probability of providing care by 2.9 percentage points while the daily hours of care provision rise by around 0.05 h per week-day. Both men and women react with significant increases in care provision. We find the largest effects for women with low education.