CSIDL_LOCAL_APPDATA references a non-roaming per-user directory. Unless you want the application to only work for one user this is the wrong location. Installers can't easily put files there either since they'd need to know which user and then load the user's profile.

The proper location for a database like this would normally be a folder created under CSIDL_COMMON_APPDATA instead. However folders and files created here are assigned "owner" security so that any user aside from the one running your setup will be blocked from writing, deleting, replacing such files. The installer needs to create the subfolder, set the desired security on that folder, then copy the file (database) there.