Impact of long-term care insurance on the financial asset allocation of middle-aged and elderly households: Evidence from China

In the context of China's aging process, optimizing financial asset allocation of middle-aged and elderly households is an essential way to meet the diversified old-age security needs and do a good job in aging finance. To enrich the understanding of the “limited participation puzzle” in the financial market of middle-aged and elderly households in China, this paper takes the long-term care insurance (LTCI) pilot policy as a quasinatural experiment; takes the China Health and Retirement Longitudinal Study (CHARLS) data from 2011 to 2018 as the research sample; and empirically tests the influence, internal mechanism and heterogeneity of LTCI on the financial asset allocation of middle-aged and elderly households using difference-in-differences (DID) and intermediary effect models. The findings are as follows. First, LTCI can significantly promote middle-aged and elderly households’ participation in risky financial markets, and this finding still holds under a series of robustness tests. Second, LTCI can promote the financial asset allocation of middle-aged and elderly households by improving their heath capital. Third, the effects of LTCI pilot policies on the income level and household registration of middle-aged and elderly households significantly differ. The effect of LTCI is more obvious in the sample of high-income and urban households than in the sample of low- and middle-income and rural households. These results help provide a policy basis for realizing the innovation of the economy and financial market products in a deeply aging society and facilitating organic connections between these products.