Pensions and household consumption in rural China

Purpose - The purpose of this paper is to examine the new rural social pension program’s effect on household consumption in rural China. Design/methodology/approach - The paper employs field data in Hebei Province and comprehensively applies the ordinary least squares regression model and the difference-in-difference matching method. Findings - The findings show that participation in the Program may not obviously increase household consumption, rather it significantly inhibits the marginal propensity of young families’ consumption temporarily without an apparent impact on participating households’ consumption. Practical implications - In addition to maintain the stability of the basic system framework of the new rural social pension program and preserve or increase the value of the fund under the Program, dynamic adjustments to pension levels should be made as and when appropriate. Originality/value - The study provides a new empirical evidence for the relationship between the new rural social pension program and consumption and gives insight into potential modifications and improvements to the Program.