Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China

Nikolov, Plamen and Adelman, Alan (2019): Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China.

Abstract

Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents’ income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: life cycle, retirement, pension, inter vivos transfers, middle-income countries, developing countries, China, crowd-out effect, aging
• Subjects: D - Microeconomics > D6 - Welfare Economics > D64 - Altruism ; Philanthropy; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents; H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; J - Labor and Demographic Economics > J1 - Demographic Economics; J - Labor and Demographic Economics > J1 - Demographic Economics > J14 - Economics of the Elderly ; Economics of the Handicapped ; Non-Labor Market Discrimination; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J26 - Retirement ; Retirement Policies; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O12 - Microeconomic Analyses of Economic Development; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O15 - Human Resources ; Human Development ; Income Distribution ; Migration; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis

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