Economic effects of pension reform: applying the overlapping generations model to long-term nursing care

This study examines how pension reform will affect households’ caregiving practices and welfare through changes in the price of care. The results show that, in the long run, pension reform theoretically increases the price of formal care and places a greater weight on informal care. We also use numerical methods to clarify the effects of the transition to a pension system on the quality of informal care and economic welfare. In the long run, the transition to a pension system improves the quality of informal care and economic welfare. However, during the transition period, the values for some generations are worse than those before the transition. A phased transition of the pension system is also examined. The results show that an immediate transition may reduce the burden on the generation affected by the decline in the quality and welfare of informal care.