On the Consumption Insurance Effects of Long-term Care Insurance in Japan: Evidence from Micro-level Household Data

Using micro-level household data in the 2001 Comprehensive Survey of the Living Conditions of the People on Health and Welfare compiled by the Japanese Ministry of Health, Labor and Welfare, this paper examines how having a household member in need of long-term nursing care can result in welfare losses measured in terms of consumption. In so doing, this study evaluates the role of the public long-term care insurance scheme implemented in Japan in April 2000. The results indicate that when households include a disabled family member, household consumption net of long-term care costs do not decrease as much as before the introduction of long-term care insurance. Further, when compared with the surveys conducted in 1998, the adverse effects on consumption net of long-term care costs have become much weaker. These findings suggest that the introduction of social insurance in 2000 helped Japanese households to reduce the welfare losses associated with a disabled family member. JEL classification numbers: E21, I18