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Abstract
Housing has become the most important asset held by a large proportion of China’s older citizens. Therefore, the role of housing wealth in the consumption decisions of the elderly is a central topic of research and gains insights into the saving, investment and consumption decisions made throughout household life to meet later pension needs. In this paper, using data drawn from a household survey conducted between 2002 and 2009, we estimate the influence of housing wealth on the non-housing consumption of the elderly, and identify the mechanisms underlying this relationship. We find that on average, changes in housing wealth have limited effects on elderly consumption. However, we also find that the role of housing in consumption differs according to the income, health status, and living arrangements of the elderly. The paper draws attention to the influence of housing and its links with social and health-care systems on the lives of older people, with important policy implications.
Notes
1. Data source: Urban Household Survey (UHS).
2. Data source: the Cabinet Office of Japan.
3. Data source: U.S. Census Bureau News.
4. On September 17, 2011, the State Council issued a ‘Twelfth Five Year Plan’ in China Aging Development.
5. Source: OECD Pensions at a Glance 2013.
6. Chinese Family Financial Report.
7. Data from the United Nations Economic Commission for Europe.
8. Until the early 1990s, more than 90 per cent of China’s urban residents were living in public housing (World Bank, 1993). However, due to the massive privatization of public-housing stocks in the late 1990s, China gained one of the highest homeownership rates in the world within just one decade.
9. China’s mortgage market is still emerging. As the re-mortgaging system is rigid, the elderly have limited access to the mortgage market to fund their consumption.
10. Income here denotes ‘elderly disposable income’, which includes wage, capital gains, and inter-generation transfers. We did not separately show the marginal effect of remittance and household transfers due to two major concerns: First, these two variables could be highly correlated with elderly pension income (in our database, the absolute covariance value exceeds 0.7), which might effect the robustness of parameter estimation; Second, remittance and household transfers is only the control variable and not the focus of this paper.
11. hukou refers to a household-registration record that officially identifies an individual as a resident of a given area. It is one of China’s most important institutions, as it defines individuals’ socio-economic status and access to welfare benefits.
12. As mentioned above, the 1998 housing reform announced that welfare housing distribution would be abandoned at the end of 1998 and completely replaced by monetary distribution, implicating a full marketization stage in housing reform. After the 1998 housing reform, public housing was generally operated to to sitting tenants through work units at standard or construction price.
13. ‘Medical and health-care expenditure’ here denotes expenditure on both pharmaceutical products and medical treatment. It comprises the costs of all medical services, including out-of-pocket medical expenses and the reimbursement of expenses via any kind of health insurance.
14. In the CHARLS (the Chinese Health and Retirement Longitudinal Study) dataset, 46 per cent of the elderly sample self-estimated their health status as lower than the average. We also get similar results from CHARLS 2011 and 2013.
15. During our sample period (2002–2009), there is a significant difference in the growth rate of housing price in eastern, middle, and western China. According to the National Bureau of Statistics, the average growth rate of commodity housing price in these three regions are 22.1, 16.2, and 12.6 per cent respectively. In our empirical studies, eastern provinces include Beijing, Liaoning, Zhejiang, Guangdong; middle provinces include Hubei and Anhui; west provinces include Sichuan, Shanxi and Gansu.
16. They find that, among elderly with physical problems, frequent help from an adult child with basic personal care reduced the likelihood of nursing home care by about 70 per cent over a two-year period.