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Who Benefits from Public Old Age Pensions? Evidence from a Targeted Program

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  • Elliott Fan

Abstract

Given the aging of the population, policies relating to the design and reform of public pension programs are prominent in policy debates. For many developing countries, a major concern centers around the possible displacement of traditional family-based support by public programs. One challenge in estimating this displacement, or crowding out, is the endogeneity of social security benefits-the incidence and size of benefits may be correlated with unobserved determinants of private transfers, especially if benefits are means tested. Using two rich data sets, this article explores the impact of the Taiwanese Farmers' Pension Program (FPP) on recipients and their noncohabiting adult children. The FPP is targeted at elderly farmers and has relatively clean, exogenous rules for eligibility that allow the endogeneity problem to be addressed. Estimates from multiple identification strategies consistently imply that 1 dollar of pension crowds out 30-39 cents of private transfers received by the elderly. Mirroring these results, the pension also reduces the probability that the recipients' children make transfers to their parents. Further, the pension increases both the recipients' and their children's consumption, thus providing direct evidence of an improvement in the well-being of pensioners' offspring. (c) 2010 by The University of Chicago. All rights reserved.

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  • Elliott Fan, 2010. "Who Benefits from Public Old Age Pensions? Evidence from a Targeted Program," Economic Development and Cultural Change, University of Chicago Press, vol. 58(2), pages 297-322, January.
    • Handle: RePEc:ucp:ecdecc:v:58:y:2010:i:2:p:297-322
    DOI: 10.1086/647977
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    Cited by:

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    2. Nikolov, Plamen & Adelman, Alan, 2019. "Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    3. Yang, Feng-An & Chang, Hung-Hao, 2023. "Impact of a pension program on healthcare utilization among older farmers: Empirical evidence from health claims data," World Development, Elsevier, vol. 169(C).
    4. Bando, Rosangela & Galiani, Sebastian & Gertler, Paul, 2022. "Another brick on the wall: On the effects of non-contributory pensions on material and subjective well being," Journal of Economic Behavior & Organization, Elsevier, vol. 195(C), pages 16-26.
    5. Laura Juarez & Tobias Pfutze, 2015. "The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 63(4), pages 685-713.
    6. Kaushal, Neeraj, 2014. "How Public Pension affects Elderly Labor Supply and Well-being: Evidence from India," World Development, Elsevier, vol. 56(C), pages 214-225.
    7. Herrmann, Tabea & Leckcivilize, Attakrit & Zenker, Juliane, 2021. "The impact of cash transfers on child outcomes in rural Thailand: Evidence from a social pension reform," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    8. Laura Juárez & Yunuen Nicte Rodríguez Piña, 2020. "El efecto de las pensiones no contributivas sobre el bienestar subjetivo de los adultos mayores en México," Serie documentos de trabajo del Centro de Estudios Económicos 2020-03, El Colegio de México, Centro de Estudios Económicos.
    9. Bottan, Nicolas & Hoffmann, Bridget & Vera-Cossio, Diego A., 2021. "Stepping up during a crisis: The unintended effects of a noncontributory pension program during the Covid-19 pandemic," Journal of Development Economics, Elsevier, vol. 150(C).
    10. Yanying Chen & Yi Jin Tan, 2018. "The effect of non-contributory pensions on labour supply and private income transfers: evidence from Singapore," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 7(1), pages 1-54, December.
    11. Ravallion, Martin & Chen, Shaohua, 2013. "Benefit incidence with incentive effects, measurement errors and latent heterogeneity," Policy Research Working Paper Series 6573, The World Bank.
    12. Heath Henderson & Arnob Alam, 2022. "The structure of risk-sharing networks," Empirical Economics, Springer, vol. 62(2), pages 853-886, February.
    13. Hungerman, Daniel M., 2014. "Public goods, hidden income, and tax evasion: Some nonstandard results from the warm-glow model," Journal of Development Economics, Elsevier, vol. 109(C), pages 188-202.
    14. Ravallion, Martin & Chen, Shaohua, 2015. "Benefit incidence with incentive effects, measurement errors and latent heterogeneity: A case study for China," Journal of Public Economics, Elsevier, vol. 128(C), pages 124-132.
    15. Clemente Ávila‐Parra & David Escamilla‐Guerrero & Oscar Gálvez‐Soriano, 2024. "Minimum eligibility age for social pensions and household poverty: Evidence from Mexico," Economic Inquiry, Western Economic Association International, vol. 62(1), pages 175-196, January.
    16. Independent Evaluation Group, 2014. "Social Safety Nets and Gender : Learning from Impact Evaluations and World Bank Projects," World Bank Publications - Books, The World Bank Group, number 21365, December.
    17. Zhaohua Zhang & Yuxi Luo & Derrick Robinson, 2019. "Who Are the Beneficiaries of China’s New Rural Pension Scheme? Sons, Daughters, or Parents?," IJERPH, MDPI, vol. 16(17), pages 1-16, August.

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