What can emerging markets learn from a public long-term care insurance system from a mature country: Experimental study?

In this experimental study, we focus on the issue of welfare policy change in society before and after a public long-term care insurance (LTCI) system. Our experimental study tries to find who benefits the most among different age cohorts by the change in policy. We present a structural model to estimate welfare changes of individuals and to estimate monetary gains for different age groups as well. Using the pooled cross section data of the National Survey on Life Insurance, Japan: Fiscal Year 1997, 2000 and 2003, we find the absolute risk aversion (ARA) of all age groups decreases and their welfare gains are substantial due to the public LTCI change in 2000. We were surprised to find the most beneficiary cohort is the group aged less than 40 years, who is neither subject to the LTCI tax nor generally entitled for the benefits. The experimental results disturb clue of horizontal equity. It reassures that Japanese government would impose LTCI tax on people below age 40 to achieve socio-economic equity and cost/benefit break even.