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Does the Old Age Pension Scheme Improve Household Welfare? Evidence from India

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  • Vidhya UNNIKRISHNAN

    (Global Development Institute, The University of Manchester, UK)

  • Katsushi S. Imai

    (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan, and Department of Economics, The University of Manchester, UK)

Abstract

As India's population has been ageing due to declines in fertility and mortality rates, more policy emphasis has been placed on reducing poverty among the elderly. The aim of the present study is to examine the effect of Indira Gandhi National Old Age Pension Scheme (IGNOAPS) on both short and long-term household welfare indicators, such as consumption expenditure. Using the household longitudinal data based on the Indian Human Development Survey in 2004-05 and 2011-12, we have applied the Propensity Score Matching (PSM) to build a counterfactual group and have used the propensity-score weighted fixed effects model to eliminate time-invariant unobservable characteristics to estimate the effect of IGNOAPS on household welfare. The results show that IGNOAPS participation and the payments received generally reduced household poverty by increasing consumption expenditure, food and non-food expenditure. However, the results of Difference-in-Difference model imply that the poverty-reducing effect deteriorated in 2011-2012 after 2007 when a number of changes were made to programme specifications of IGNOAPS. This was likely due to the fact that some households which accessed IGNOAPS after 2007 reduced the labour supply significantly, while they did not change the level of consumption.

Suggested Citation

  • Vidhya UNNIKRISHNAN & Katsushi S. Imai, 2018. "Does the Old Age Pension Scheme Improve Household Welfare? Evidence from India," Discussion Paper Series DP2018-20, Research Institute for Economics & Business Administration, Kobe University, revised May 2020.
    • Handle: RePEc:kob:dpaper:dp2018-20
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    9. Yoko Niimi & Charles Yuji Horioka, 2023. "Elderly poverty and its measurement," Chapters, in: Jacques Silber (ed.), Research Handbook on Measuring Poverty and Deprivation, chapter 29, pages 307-315, Edward Elgar Publishing.
    10. Yang, Feng-An & Chang, Hung-Hao, 2023. "Impact of a pension program on healthcare utilization among older farmers: Empirical evidence from health claims data," World Development, Elsevier, vol. 169(C).
    11. Sridhar Kundu & Maynor Cabrera, 2022. "Fiscal Policies and their Impact on Income Distribution in India," Commitment to Equity (CEQ) Working Paper Series 120, Tulane University, Department of Economics.
    12. Maria Laura Alzua & Natalia Cantet & Ana C Dammert & Damilola Olajide, 2024. "The Well-being Effects of an Old-Age Pension: Experimental Evidence for Ekiti State in Nigeria," Journal of African Economies, Centre for the Study of African Economies, vol. 33(3), pages 240-270.
    13. Chatterjee, Sidharta, 2022. "Rationalizing Decision Choices: What Influences our Social Decision Making?," MPRA Paper 114985, University Library of Munich, Germany.
    14. 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.
    15. Liu, Xueying & Zhao, Zhong, 2025. "Does social pension insurance increase the efficiency of household financial portfolios?," Finance Research Letters, Elsevier, vol. 81(C).
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    20. Nelson Kemboi Yego & Juma Kasozi & Joseph Nkurunziza, 2023. "Optimizing Pension Participation in Kenya through Predictive Modeling: A Comparative Analysis of Tree-Based Machine Learning Algorithms and Logistic Regression Classifier," Risks, MDPI, vol. 11(4), pages 1-21, April.
    21. Guimbeau, Amanda & Menon, Nidhiya, 2024. "Pensions and Depression: Gender-Disaggregated Evidence from the Elderly Poor in India," IZA Discussion Papers 17530, Institute of Labor Economics (IZA).
    22. Dong, Shizheng & Zhang, Zili & Han, Yiduo & Si, Yanwu, 2023. "Do pension subsidies reduce household education expenditure inequality? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 87(C), pages 532-540.
    23. Alzua, Maria Laura & Cantet, Maria Natalia & Dammert, Ana & Olajide, Daminola, 2020. "Mental Health Effects of an Old Age Pension: Experimental Evidence for Ekiti State in Nigeria," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304176, Agricultural and Applied Economics Association.
    24. Nicolò Bird & Isabela Franciscon & Yannick Markhof & Pedro Arruda & Krista Alvarenga, 2021. "Social assistance programmes in South Asia: an evaluation of socio-economic impacts," One Pager 494, International Policy Centre.
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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