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The role of public pensions in income inequality among elderly households in China 1988–2013

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

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 and 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 & Xu, Jing & Yuan, Chang, 2020. "The role of public pensions in income inequality among elderly households in China 1988–2013," China Economic Review, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:chieco:v:61:y:2020:i:c:s1043951x20300195
    DOI: 10.1016/j.chieco.2020.101422
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    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. 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.
    5. 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.
    6. 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).
    7. Akisik, Orhan & Gal, Graham, 2023. "IFRS, financial development and income inequality: An empirical study using mediation analysis," Economic Systems, Elsevier, vol. 47(2).
    8. 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.
    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. Huang, Ruting & Yao, Xin, 2023. "The role of power transmission infrastructure in income inequality: Fresh evidence from China," Energy Policy, Elsevier, vol. 177(C).
    12. Li Yang, 2021. "Towards equity and sustainability? China’s pension system reform moves center stage," Working Papers halshs-03215912, HAL.

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    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

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