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Should China introduce a social pension?

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  • Lu, Bei
  • He, Wenjiong
  • Piggott, John

Abstract

In spite of recent policy innovations, more than half China’s population have little cash benefit entitlement in later life. This paper calculates the revenue costs of a universal social pension scheme for China, using the poverty line as the standard for pension benefit. We provide new estimates of longevity into the future using the Lee-Carter approach. Alternative benefit scenarios are used to assess the burden of the plan on younger generations. Our central case estimates lie in the range of 0.7–1% of GDP annually, over a 40year horizon, set at the current poverty line of about 6.6% of GDP per capita, with retirement age increased to 65, and assuming that those with formal pension entitlement are excluded. With more generous benefits, lower retirement age, and lower than expected fertility, however, costs can be as high as 4.5% of GDP.

Suggested Citation

  • Lu, Bei & He, Wenjiong & Piggott, John, 2014. "Should China introduce a social pension?," The Journal of the Economics of Ageing, Elsevier, vol. 4(C), pages 76-87.
    • Handle: RePEc:eee:joecag:v:4:y:2014:i:c:p:76-87
    DOI: 10.1016/j.jeoa.2013.12.001
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    References listed on IDEAS

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    1. Willmore, Larry, 2007. "Universal Pensions for Developing Countries," World Development, Elsevier, vol. 35(1), pages 24-51, January.
    2. Ronald Lee, 2000. "The Lee-Carter Method for Forecasting Mortality, with Various Extensions and Applications," North American Actuarial Journal, Taylor & Francis Journals, vol. 4(1), pages 80-91.
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    5. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection Discussion Papers and Notes 36237, The World Bank.
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    Cited by:

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    3. Lu, Bei & Yang, Mingxu & Cumming, Robert G. & Stanaway, Fiona F., 2020. "Falls and impact on disability and healthy life expectancy in China: Evidence from the China Health and Retirement Longitudinal Survey (CHARLS)," China Economic Review, Elsevier, vol. 61(C).
    4. Ce Shen & Jessica Johnson & Zhenhe Chi & John B. Williamson, 2020. "Does a universal non‐contributory social pension make sense for rural China?," International Social Security Review, John Wiley & Sons, vol. 73(2), pages 3-26, April.
    5. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.

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