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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.

Suggested Citation

  • Lixin He & Hiroshi Sato, 2011. "Income Redistribution in Urban China by Social Security System: An Empirical Analysis Based on Annual and Lifetime Income," Global COE Hi-Stat Discussion Paper Series gd11-193, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hst:ghsdps:gd11-193
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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd11-193.pdf
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    References listed on IDEAS

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    1. 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.
    2. 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, pages 93-126.
    3. 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.
    4. 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, pages 2229-2255.
    5. Feng, Jin & He, Lixin & Sato, Hiroshi, 2011. "Public pension and household saving: Evidence from urban China," Journal of Comparative Economics, Elsevier, pages 470-485.
    6. Feng, Jin & He, Lixin & Sato, Hiroshi, 2011. "Public pension and household saving: Evidence from urban China," Journal of Comparative Economics, Elsevier, pages 470-485.
    7. Nelissen, Jan H M, 1995. "Lifetime Income Redistribution by Social Security," Journal of Population Economics, Springer;European Society for Population Economics, pages 89-105.
    8. 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.
    9. Nelissen, Jan H M, 1995. "Lifetime Income Redistribution by Social Security," Journal of Population Economics, Springer;European Society for Population Economics, pages 89-105.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A Primer on Poverty and Economic Growth
      by Filip Spagnoli in P.A.P.-Blog on 2014-05-06 23:48:31

    More about this item

    Keywords

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

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • P43 - Economic Systems - - Other Economic Systems - - - Finance; Public Finance

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