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Income Redistribution in Urban China by Social Security System: An Empirical Analysis Based on Annual and Lifetime Income

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  • Lixin He
  • Hiroshi Sato

Abstract

This study investigates the redistributive effect of the social security reform in urban China using the nationally representative urban household surveys in 1995 and 2002. The main findings are as follows. First, public pension is the main income for the elderly in urban China. Majority of people aged 60 and over (72% in 1995, 82% in 2002) have pension. Second, the social security system in urban China improved the income of low-income and older age groups and reduced the relative poverty rate. However, the redistributive effect did not offset the expanding income inequality, which resulted in the Gini coefficient of redistributed income in 2002 being higher than that in 1995. Third, during 1995 and 2002, both low income group and high income group get positive net benefit from social security system, but the net benefit is increasing with income. There is an adverse income transfer in social security system no matter measured on annual income or lifetime income. Fourth, assuming that the reformed policy were applied to public sector employees, the long-term redistributive effect of the pension system for the working population, as calculated using their lifetime income, would be larger.

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Bibliographic Info

Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd11-193.

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Date of creation: Jul 2011
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Handle: RePEc:hst:ghsdps:gd11-193

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Keywords: lifetime income; income redistribution; social security; pension; China;

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  1. Jin Feng & Lixin He & Hiroshi Sato, 2009. "Public Pension and Household Saving: Evidence from urban China," Global COE Hi-Stat Discussion Paper Series gd08-030, Institute of Economic Research, Hitotsubashi University.
  2. Cai, Fang & Giles, John & Meng, Xin, 2006. "How well do children insure parents against low retirement income? An analysis using survey data from urban China," Journal of Public Economics, Elsevier, vol. 90(12), pages 2229-2255, December.
  3. Nelissen, J.H.M., 1995. "Lifetime income redistribution by social security," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3969204, Tilburg University.
  4. Martin S. Feldstein & Jeffrey B. Liebman, 2002. "Introduction to "The Distributional Aspects of Social Security and Social Security Reform"," NBER Chapters, in: The Distributional Aspects of Social Security and Social Security Reform, pages 1-10 National Bureau of Economic Research, Inc.
  5. Martin Feldstein & Jeffrey B. Liebman, 2002. "The Distributional Aspects of Social Security and Social Security Reform," NBER Books, National Bureau of Economic Research, Inc, number feld02-1, May.
  6. Terry Sicular & Yue Ximing & Björn Gustafsson & Li Shi, 2007. "The Urban-Rural Income Gap And Inequality In China," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(1), pages 93-126, 03.
  7. Oshio, Takashi, 2003. "Social Security and Intragenerational Redistribution of Lifetime Income in Japan," Discussion Paper 172, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
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  1. A Primer on Poverty and Economic Growth
    by Filip Spagnoli in P.A.P.-Blog on 2014-05-06 18:48:31

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