The Impact of Long-Term Care Insurance on Land Transfer-Out Behavior: Evidence from Rural China

Land transfers are essential for promoting large-scale farming, agricultural productivity, and development of the nonfarm economy. Notwithstanding emerging research on the drivers of land rental participation, limited evidence exists on whether Long-Term Care Insurance (LTCI), in assuring older people with affordable care services, has contributed to land transfer-out. Exploiting China’s LTCI pilot program as a quasi-natural experiment, this study draws on five-wave panel data from the China Health and Retirement Longitudinal Study (CHARLS) spanning 2011 to 2020, and employs a staggered difference-in-differences (DID) approach to evaluate the intention-to-treat effect of LTCI on land transfer-out behavior among potentially eligible rural households. The results show that LTCI increases the probability of land transfer-out by 8.7 percentage points, equivalent to a 48.6% increase relative to the sample mean. The estimates support the validity of the parallel trends assumption and remain consistent across various robustness tests. Mechanism analysis reveals that LTCI promotes land transfer-out through two pathways: substituting formal care for informal care to facilitate adult children’s migration for work, and mitigating background risks to enhance rural households’ risk preferences. Heterogeneity analysis suggests that the LTCI effects are more pronounced for rural households with higher expected long-term care (LTC) risks, less wealth, more LTC experience, and covered by more generous LTCI programs. By providing the first evaluation of LTCI’s impact on land transfer-out behavior, this study underscores the positive role of LTCI in enhancing land use efficiency, and offers broader policy insights for improvement in establishing LTCI worldwide.