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Public pension policy, substitution income, and poverty reduction: Evidence from China

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  • Zhan, Peng
  • Zhang, Anqi
  • Ma, Xinxin

Abstract

This paper investigates the pension effect on poverty reduction in rural China, considering the influences of potential substitution income, including earned and transfer income from older adults and children, respectively. The study created a counterfactual group to impute potential substitution income from the income distribution perspective. We find that when substitution income is not considered, pension effect on poverty reduction may be overestimated. Comparing the two types of substitution income, earned income is found to have a larger effect than that of transfer income from children, and it is significantly more for the middle- and high-income groups. The substitution relationship between pensions and earned income has increased in China in recent years.

Suggested Citation

  • Zhan, Peng & Zhang, Anqi & Ma, Xinxin, 2023. "Public pension policy, substitution income, and poverty reduction: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1138-1154.
    • Handle: RePEc:eee:ecanpo:v:80:y:2023:i:c:p:1138-1154
    DOI: 10.1016/j.eap.2023.09.035
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    Keywords

    Pension; Substitution income; Poverty reduction; Income distribution; Rural China;
    All these keywords.

    JEL classification:

    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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