Social pensions and risky financial asset holding in China

ABSTRACT

This study explores the impact of social pensions on risky household financial asset holding, taking the Urban and Rural Residents Pension Scheme (URRPS) in China as an example. We combine regression discontinuity with the difference-in-difference approach to analyze the 2015 and 2017 China Household Finance Survey (CHFS) data. The results show that the URRPS has significantly increased the likelihood of holding risky financial assets among Chinese households. Furthermore, the effect is larger for urban households than for rural households. Apart from social pensions, marital and health status, education, risk attitude, household size, asset value, and urban residence also affect the households’ risky financial asset holdings.

KEYWORDS:

• Social pensions
• URRPS
• Risky financial assets
• RD-DID
• China

JEL CODES:

• H55
• G11
• D14

Acknowledgements

The authors greatly acknowledge the financial support from the National Social Science Found of China (No.20AZD046, No.21ZDA060), China Postdoctoral Science Foundation (No.2019M661455), Program for Innovative Research Team of Shanghai University of Finance and Economics (No. 2018110693), and the Fundamental Research Funds for the Central Universities of Shanghai University of Finance and Economics (No. 2019110104, No. 2020110576). They also extend their sincere thanks to NSFC, China Postdoctoral Science Foundation and Shanghai University of Finance and Economics for supporting the study.

Disclosure statement

No potential conflict of interest was reportedby the authors.

Notes

¹ As indicated earlier, the NRPS and URPS were merged into the URRPS in 2014. Thus, the accumulated balance fund of the URRPS in 2014 comprises of the surplus funds from the NRPS and URPS in previous year.

² The data is available at: http://chfs.swufe.edu.cn/datas/.

³ Bonds are not considered risky assets because the national debts or policy financial bonds are generally considered risk-free in China’s bonds markets. Although corporate bonds are considered to be risky, their market share is very small. The derivative and non-RMB assets are not included as a risky financial asset because very few households purchased it in our samples.

Additional information

Funding

The work was supported by the China Postdoctoral Science Foundation [2019M661455]; Program for Innovative Research Team of Shanghai University of Finance and Economics [2018110693]; National Social Science Found of China [20AZD046; 21ZDA060]; the Fundamental Research Funds for the Central Universities of Shanghai University of Finance and Economics [2019110104, 2020110576]