IDEAS home Printed from https://ideas.repec.org/p/hit/cisdps/674.html
   My bibliography  Save this paper

The Role of Public Pensions in Income Inequality among Elderly Households in China 1988–2013

Author

Listed:
  • Li, Jinjing
  • Wang, Xinmei
  • Yuan, Chang
  • Xu, Jing

Abstract

Using data from the Chinese Household Income Project surveys for 1988, 1995, 2002 and 2013, we investigate the role of public pensions in income inequality among households with elderly members across two decades of pension policy reforms. We examine the distribution and role of public pensions at a national level. We analyse the evolution of the contribution of public pensions to national income inequality across a much more extended time period than earlier studies, which have generally focused on regional changes over short periods. Our findings suggest that public pensions have become the most important source of income for households with elderly members on average in China, but the distribution of pension income is highly unequal, with a Gini coefficient of 0.74 in 2013. Public pension income has been the largest source of income inequality for elderly households since 2002 and contributed to more than half of total income inequality in the most recent year of the survey. This finding is robust against variations in the income inequality measures used. Additionally, our analysis suggests unequal distribution of pension benefits is the primary driver of pensioners’ income inequality. Among several hypothetical policy changes, ensuring a minimum pension benefit for all existing pensioners seems to be the most fiscally effective option in reducing income inequality, with a 0.8% reduction in the Gini coefficient for a 1% increase in public pension expenditure.

Suggested Citation

  • Li, Jinjing & Wang, Xinmei & Yuan, Chang & Xu, Jing, 2018. "The Role of Public Pensions in Income Inequality among Elderly Households in China 1988–2013," CIS Discussion paper series 674, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:cisdps:674
    as

    Download full text from publisher

    File URL: https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/29761/DP674.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dennis Tao Yang, 1999. "Urban-Biased Policies and Rising Income Inequality in China," American Economic Review, American Economic Association, vol. 89(2), pages 306-310, May.
    2. Feldstein, Martin, 1999. "Social security pension reform in China," China Economic Review, Elsevier, vol. 10(2), pages 99-107.
    3. Wang, Lijian & Béland, Daniel & Zhang, Sifeng, 2014. "Pension fairness in China," China Economic Review, Elsevier, vol. 28(C), pages 25-36.
    4. Gustafsson,Björn A. & Shi,Li & Sicular,Terry (ed.), 2008. "Inequality and Public Policy in China," Cambridge Books, Cambridge University Press, number 9780521870450.
    5. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-740, September.
    6. Paul Makdissi & Quentin Wodon, 2012. "Gini Decomposition And Gini Income Elasticity Under Income Variability," Bulletin of Economic Research, Wiley Blackwell, vol. 64(2), pages 184-191, April.
    7. Robert Brown & Steven Prus, 2004. "Social Transfers And Income Inequality In Old Age," North American Actuarial Journal, Taylor & Francis Journals, vol. 8(4), pages 30-36.
    8. Qin Gao & Irwin Garfinkel & Fuhua Zhai, 2009. "Anti‐Poverty Effectiveness Of The Minimum Living Standard Assistance Policy In Urban China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(s1), pages 630-655, July.
    9. Cowell, Frank, 2011. "Measuring Inequality," OUP Catalogue, Oxford University Press, edition 3, number 9780199594047, Decembrie.
    10. Molero-Simarro, Ricardo, 2017. "Inequality in China revisited. The effect of functional distribution of income on urban top incomes, the urban-rural gap and the Gini index, 1978–2015," China Economic Review, Elsevier, vol. 42(C), pages 101-117.
    11. Lixin He & Hiroshi Sato, 2013. "Income Redistribution In Urban China By Social Security System—An Empirical Analysis Based On Annual And Lifetime Income," Contemporary Economic Policy, Western Economic Association International, vol. 31(2), pages 314-331, April.
    12. Fang Cai & John Giles & Philip O'Keefe & Dewen Wang, 2012. "The Elderly and Old Age Support in Rural China : Challenges and Prospects," World Bank Publications - Books, The World Bank Group, number 2249, December.
    13. Stéphane Mussard & Michel Terraza & Françoise Seyte, 2003. "Decomposition of Gini and the generalized entropy inequality measures," Economics Bulletin, AccessEcon, vol. 4(7), pages 1-6.
    14. Li,Shi & Sato,Hiroshi & Sicular,Terry (ed.), 2013. "Rising Inequality in China," Cambridge Books, Cambridge University Press, number 9781107002913.
    15. repec:wbk:wbpubs:6007 is not listed on IDEAS
    16. Brandt, Loren & Holz, Carsten A, 2006. "Spatial Price Differences in China: Estimates and Implications," Economic Development and Cultural Change, University of Chicago Press, vol. 55(1), pages 43-86, October.
    17. repec:ebl:ecbull:v:4:y:2003:i:7:p:1-6 is not listed on IDEAS
    18. Lerman, Robert I. & Yitzhaki, Shlomo, 1989. "Improving the accuracy of estimates of Gini coefficients," Journal of Econometrics, Elsevier, vol. 42(1), pages 43-47, September.
    19. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-156, February.
    20. Judith Banister & David E. Bloom & Larry Rosenberg, 2012. "Population Aging and Economic Growth in China," International Economic Association Series, in: Masahiko Aoki & Jinglian Wu (ed.), The Chinese Economy, chapter 6, pages 114-149, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hanewald, Katja & Jia, Ruo & Liu, Zining, 2021. "Why is inequality higher among the old? Evidence from China," China Economic Review, Elsevier, vol. 66(C).
    2. Weiwei Wang & Yifan Zhao, 2023. "Impact of Natural Disasters on Household Income and Expenditure Inequality in China," Sustainability, MDPI, vol. 15(18), pages 1-15, September.
    3. Sierminska, Eva & Wroński, Marcin, 2022. "Inequality and Public Pension Entitlements," GLO Discussion Paper Series 1212, Global Labor Organization (GLO).
    4. Gong, Chen & Sologon, Denisa Maria & Nimeh, Zina & O'Donoghue, Cathal, 2023. "Decomposition of the Changes in Household Disposable Income Distribution in China," IZA Discussion Papers 15914, Institute of Labor Economics (IZA).
    5. Akisik, Orhan & Gal, Graham, 2023. "IFRS, financial development and income inequality: An empirical study using mediation analysis," Economic Systems, Elsevier, vol. 47(2).
    6. Li Yang, 2021. "Towards equity and sustainability? China’s pension system reform moves center stage," Working Papers halshs-03215912, HAL.
    7. Anqi Zhang & Katsushi S. Imai, 2022. "Does a Universal Pension Reduce Elderly Poverty in China?," Economics Discussion Paper Series 2203, Economics, The University of Manchester.
    8. Wenran Xia & Jeroen D. H. van Wijngaarden & Robbert Huijsman & Martina Buljac-Samardžić, 2022. "Effect of Receiving Financial Support from Adult Children on Depression among Older Persons and the Mediating Role of Social Participation," IJERPH, MDPI, vol. 19(19), pages 1-16, October.
    9. Anqi Zhang & Katsushi S. Imai, 2022. "Does a Universal Pension Reduce Elderly Poverty in China?," Discussion Paper Series DP2022-30, Research Institute for Economics & Business Administration, Kobe University.
    10. Li Yang, 2021. "Towards equity and sustainability? China’s pension system reform moves center stage," World Inequality Lab Working Papers halshs-03215912, HAL.
    11. Tongwei Xie & Changjiang Xiong & Qing Xu & Tianshu Zhou, 2022. "The Impact of Social Pension Scheme on Farm Production in China: Evidence from the China Health and Retirement Longitudinal Survey," IJERPH, MDPI, vol. 19(4), pages 1-13, February.
    12. Huang, Ruting & Yao, Xin, 2023. "The role of power transmission infrastructure in income inequality: Fresh evidence from China," Energy Policy, Elsevier, vol. 177(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nora Lustig & Yang Wang, 2020. "The Impact of Taxes and Transfers on Income Inequality, Poverty, and the Urban-Rural And Regional Income Gaps in China," Commitment to Equity (CEQ) Working Paper Series 93, Tulane University, Department of Economics.
    2. Baeten, Steef & Van Ourti, Tom & van Doorslaer, Eddy, 2013. "Rising inequalities in income and health in China: Who is left behind?," Journal of Health Economics, Elsevier, vol. 32(6), pages 1214-1229.
    3. Hisatoshi Hoken & Hiroshi Sato, 2017. "Public Policy and Long-Term Trends in Inequality in Rural China, 1988-2013," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201716, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    4. Gustafsson, Björn & LI, Shi & Sato, Hiroshi, 2014. "Data for studying earnings, the distribution of household income and poverty in China," China Economic Review, Elsevier, vol. 30(C), pages 419-431.
    5. Kakwani, Nanak & Li, Shi & Wang, Xiaobing & Zhu, Mengbing, 2019. "Evaluating the effectiveness of the rural minimum living standard guarantee (Dibao) program in China," China Economic Review, Elsevier, vol. 53(C), pages 1-14.
    6. Valerio Mendoza, Octasiano M., 2016. "Preferential policies and income inequality: Evidence from Special Economic Zones and Open Cities in China," China Economic Review, Elsevier, vol. 40(C), pages 228-240.
    7. Akli Berri, 2009. "Transport consumption inequalities and redistributive effects of taxes: A repeated cross-sectional evaluation on French household data," Working Papers 145, ECINEQ, Society for the Study of Economic Inequality.
    8. Wroński, Marcin, 2023. "The impact of social security wealth on the distribution of wealth in the European Union," The Journal of the Economics of Ageing, Elsevier, vol. 24(C).
    9. Jing Liu & Shi Li, 2011. "Changes in Consumption Inequality in China," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201111, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    10. Gao, Qin & Yang, Sui & Li, Shi, 2015. "Welfare, targeting, and anti-poverty effectiveness: The case of urban China," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 30-42.
    11. Jeffrey Zax, 2016. "Provincial valuations of human capital in urban China, inter-regional inequality and the implicit value of a Guangdong hukou," ERSA conference papers ersa16p693, European Regional Science Association.
    12. Michele Giammatteo, 2007. "The bidimensional decomposition of inequality: A nested Theil approach," LIS Working papers 466, LIS Cross-National Data Center in Luxembourg.
    13. Taylor, J. Edward, 1992. "Remittances and inequality reconsidered: Direct, indirect, and intertemporal effects," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 187-208, April.
    14. Yong Liu & Cuihong Long, 2021. "Urban and Rural Income Gap: Does Urban Spatial Form Matter in China?," SAGE Open, , vol. 11(1), pages 21582440211, March.
    15. Koen Caminada & Kees Goudswaard & Chen Wang & Jinxian Wang, 2019. "Income Inequality and Fiscal Redistribution in 31 Countries After the Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(1), pages 119-148, March.
    16. Yu Chen & Sylvie Démurger, 2014. "Pro-rural Policies, Income, and Inequality: Evaluating a Cash-for-Work Program in Rural China," Asian Economic Papers, MIT Press, vol. 13(3), pages 87-114, Fall.
    17. John Knight & Quheng Deng & Shi Li, 2011. "The Evolution of the Migrant Labor Market in China, 2002-2007," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 201115, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    18. Medeiros, Marcelo & Souza, Pedro H.G.F., 2013. "The State and income inequality in Brazil," Institute for Research on Labor and Employment, Working Paper Series qt584222f0, Institute of Industrial Relations, UC Berkeley.
    19. Nguyen, Thanh Viet & Tran, Tuyen Quang, 2018. "Forestland and rural household livelihoods in the North Central Provinces, Vietnam," Land Use Policy, Elsevier, vol. 79(C), pages 10-19.
    20. Zhang, Chunni & Xu, Qi & Zhou, Xiang & Zhang, Xiaobo & Xie, Yu, 2014. "Are poverty rates underestimated in China? New evidence from four recent surveys," China Economic Review, Elsevier, vol. 31(C), pages 410-425.

    More about this item

    Keywords

    income inequality; public pension; Gini decomposition;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C54 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Quantitative Policy Modeling

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hit:cisdps:674. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Digital Resources Section, Hitotsubashi University Library (email available below). General contact details of provider: https://edirc.repec.org/data/cihitjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.