Working Paper: NBER ID: w24065
Authors: Xi Chen; Lipeng Hu; Jody L. Sindelar
Abstract: China’s recently implemented New Rural Pension Scheme (NRPS), the largest social pension program in the world, was designed to provide financial protection for its rural population and reduce economic inequities. Yet the impact of this program is mitigated if those eligible fail to enroll. This paper examines the extent to which pension-eligible individuals, and their families, make optimal pension decisions. Families are involved in the NRPS decisions because, in most cases, adult children need to enroll as a prerequisite of their parents’ receipt of benefits. We examine the decisions of both those eligible for pension benefits (i.e. over 60 years old) and their adult children. We use the rural sample of the 2012 China Family Panel Study to study determinants of the decision to enroll in NRPS, premiums paid, and time taken to enroll. We find evidence of low and suboptimal pension enrollment by eligible individuals and their families. Suboptimal enrollment takes various forms including failure to switch from the dominated default pension program to NRPS and little evidence that families make mutually beneficial intra-family decisions. For the older cohort, few individual and family characteristics are significant in enrollment decisions, but village characteristics play an important role. For the younger cohort, we find that more individual-level characteristics are significant, including own and children’s education. Village characteristics are important but not as much as for the older cohort.
Keywords: pension enrollment; China; social pension program; rural elderly; family dynamics
JEL Codes: D13; D14; D15; H55; I3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| village characteristics (P32) | enrollment decisions in NRPS (I23) |
| individual characteristics (Z13) | enrollment decisions in NRPS for younger cohort (I23) |
| family binding policy (J12) | enrollment decisions in NRPS (I23) |
| intergenerational ties (D15) | enrollment decisions in NRPS for individuals aged 45-60 (J26) |
| suboptimal enrollment (I24) | failure to switch from ORPS to NRPS (L39) |
| lack of understanding about NRPS (Q16) | suboptimal enrollment (I24) |
| distrust in government (H12) | suboptimal enrollment (I24) |