The Impact of China's New Rural Pension Program on Elderly Labor, Grandchild Care, and Old-Age Support

ABSTRACT

This study examines how a social pension program changes paid work patterns and expectations about the source of future financial support for the elderly in China. Using the 2011 and 2013 waves of the China Health and Retirement Longitudinal Study (CHARLS), the study finds that the New Rural Pension Program (NRPP) reduced the hours of farmwork and increased the hours of grandchild care among elderly rural men; and both elderly women and men reported less expected reliance on adult children for financial support when they become infirm. These differential effects probably occur because the size of the pension benefit is very small and because of previous gender differences in farmwork and grandchild care. Additionally, the study shows that adult children reduced out-migration and increased their hours spent in farming activities, indicating that the effect of the NRPP has spilled over to younger members of the household.

KEYWORDS:

• New rural pension program (NRPP)
• elderly labor supply
• grandchild care
• China

JEL Codes:

• J13
• J21
• J22

ACKNOWLEDGMENTS

The work was carried out with the aid of a grant from the International Development Research Center of Canada (Project no. 107579). Qin Li acknowledges financial support from the National Social Science Foundation of China (Project no. 17AJL013; Project no. 13CJY055). We also benefited greatly from the comments and suggestions of Joyce Jacobsen, Xiao-yuan Dong, Rachel Connelly, and Jin Feng on the earlier version of the study.

Notes

1 In the case of rural China, the lack of assets belonging to the elderly is partly due to collective land ownership, in which the land is not passed down from parents to children, but allocated by collectives according to membership.

2 The poverty rate is calculated according to the official national poverty line, which is RMB 2,300 per year in 2011 (US$ 1.8 a day using PPP exchange rate) and 2,674 in 2013.

3 Basic eligibility criteria are rural registration status (hukou) and not being covered by the social insurance system for urban paid workers.

4 Per capita incomes are available at National Bureau of Statistics (n.d.).

5 Wei Huang and Chuanchuan Zhang (2016) pooled data from several data sources including CHARLS and found that the pension program had a statistically significant impact on many outcomes, including health, health insurance participation, consumption, and labor supply. However, they did not study men and women separately. Using panel data from Guizhou province, Xi Chen (2016) found a large but positive impact of the rural pension on adult sons’ out-migration.

6 CHARLS is conducted by the National School of Development, Peking University. See Yaohui Zhao, John Strauss et al.(2013) for a complete discussion.

7 CHARLS had more respondents in 2013 because many individuals who were in the sample but did not respond in 2011 were successfully interviewed in 2013, and some new subjects who just turned age 45 were included as well.

8 Our results are robust to different threshold points in the selection.

9 In the CHARLS questionnaire, the question is: “Approximately how many weeks and how many hours per week did you and your spouse spend last year taking care of this child's children?”

10 This is 16 hours every day.

11 We do not know if the adult children participate in off-farm local employment.

12 The estimated results regarding the effect of the NRPP on the elderly non-farmwork are not reported. Readers can contact us by e-mail.

13 The results are not sensitive to the inclusion or exclusion of elderly people who do not have young grandchildren.

14 We choose a linear probability model instead of a logit model because the latter model may encounter the incidental parameter problem under fixed effects estimation, which leads to biased estimators (Wooldridge 2005).

Additional information

Notes on contributors

Qin Li

Qin Li is Associate Professor in the College of Economics and Management at South China Agricultural University in China. She holds a PhD in economics from Sun-Yat-Sen University. Her research interests include labor economics, health economics, and agricultural economics.

Yafeng Wang

Yafeng Wang is Research Fellow in the Institute of Social Science Survey at Peking University. His research interests include labor economics, demography, and applied econometrics. He is currently Director of the Data Department for the China Health and Retirement Longitudinal Study (CHARLS), which is based on the Health and Retirement Study and related aging surveys, such as the English Longitudinal Study of Aging (ELSA) and the Survey of Health, Aging, and Retirement in Europe (SHARE).

Yaohui Zhao

Yaohui Zhao is Yangtze River Scholar Professor of economics at Peking University. She is Principal Investigator of the China Health and Retirement Longitudinal Study (CHARLS), a nationally representative sample of Chinese residents ages 45 and older. Her research interests include labor and demographic economics, the social security system pertaining to the elderly, and health economics.