The dividend of social Insurance: how long-term care insurance reshapes household asset allocation

In the context of a rapidly ageing population, the escalating costs of elderly care pose significant challenges for households in allocating investment assets, thereby impeding optimal asset distribution. Drawing on data from the China Household Finance Survey (CHFS) spanning 2011 to 2019, this study takes the pilot of the long-term care insurance policy (LTCI policy) as a quasi-natural experiment to empirically examine how it reshapes Chinese household financial asset allocation. The findings indicate that the LTCI policy increases the share of investment assets held by households by 2.50 percentage points. The main findings remain robust to a series of robustness checks, including the Sun-Abraham event-study approach and the de Chaisemartin and D’Haultfœuille framework for addressing treatment-effect heterogeneity. Policy beneficiary analyses reveal that LTCI has significant effects among households in central and western China, urban households, risk-averse households, households with limited financial literacy, and households with low social capital. The results further show that LTCI is positively associated with household income and negatively associated with household debt, providing suggestive evidence consistent with potential income- and debt-related pathways.