Long-Term Care Insurance Policy and Development of Elderly Care Enterprises in China

Abstract

This paper examines the impact of Long-Term Care Insurance (LTCI) policy on the development of elderly care enterprises in China. Employing a policy shock and a difference-in-differences design, the authors find that the implementation of LTCI significantly promotes the number of new entries and the survival rate of elderly care enterprises, particularly for individual businesses, enterprises in the health and social work industry, and those located in eastern regions. Notably, service-only LTCI policy exhibits stronger effects on the development of elderly care enterprises compared to policies that combine service and cash benefits. Mechanism analysis suggests that LTCI stimulates market demand for formal elderly care services and increases government expenditure on healthcare and social security, both of which drive the development of elderly care enterprises. The study also finds that LTCI policy boosts labor demand in the elderly care industry. Overall, the empirical findings suggest that LTCI can help address the shortage of long-term care services and enhance family welfare.