The impact of long-term care insurance on household consumption and sustainability among aged people in China

Long-term care insurance is beneficial for boosting household consumption, thereby holding significant value in promoting economic recovery and sustainability. Despite its potential impact, the relationship between them have not been sufficiently studied. This paper aims to scrutinize the impact of long-term care insurance on household consumption and sustainability, leveraging data from the CHARLS survey spanning the years 2011 to 2018. The empirical findings reveal that: (1) firstly, the implementation of long-term care insurance has led to a substantial 20.6% increase in household subsistence consumption, and a 2.9% rise in developmental consumption. Furthermore, it has effectively diminished the proportion of subsistence consumption within the overall consumption framework by 2.2%. (2)Secondly, the augmentation of household consumption through long-term care insurance is elucidated by various mechanisms. Notably, it has stimulated labor force participation, curtailed medical expenses, and mitigated the necessity for precautionary savings. These dynamics collectively contribute to an enhanced capacity for household consumption, further reinforcing the economic benefits associated with long-term care insurance. In the context of the ongoing global challenges, particularly the aftermath of the COVID-19 pandemic, our analysis underscores the potential of long-term care insurance not only in facilitating economic recovery, but also in fortifying sustainability. As policymakers contemplate strategies for post-pandemic recovery, it is imperative for the government to consider expanding the pilot scope of long-term care insurance initiatives, which promotes economic resilience and sustains household well-being in the face of unforeseen challenges.