Journal of Population Economics

, Volume 31, Issue 1, pp 155–192 | Cite as

The heterogeneous impact of pension income on elderly living arrangements: evidence from China’s new rural pension scheme

  • Lingguo Cheng
  • Hong Liu
  • Ye Zhang
  • Zhong Zhao
Original Paper


This paper investigates the impact of pension income on living arrangements of the elderly. Taking advantage of a unique opportunity due to the recent establishment and expansion of the New Rural Pension Scheme in China, we explicitly address the endogeneity of pension status and pension income through a fixed-effect model with instrumental variable approach by exploiting exogenous time variation in the program implementation at county level. We find an overall positive effect of pension income on independent living as well as considerable heterogeneity. The positive income effects of the NRPS are concentrated among the elderly with adult children living nearby, of higher socio-economic status, and with better health at baseline; for other groups, the effects are insignificant. We also find that more generous programs exhibit larger effects. Our results highlight that living arrangement is multidimensional in rural China.


Pension income Living arrangements Heterogeneity China 

JEL classifications

J12 H55 I38 



We would like to express appreciation for comments from three anonymous referees, the editor Junsen Zhang, participants of the 2015 Annual Conference of the Chinese Economist Society, the 29th Annual Conference of the European Society for Population Economics, the 1st World Congress of Comparative Economics, and seminars at Central University of Finance and Economics and Renmin University of China. The collection of the data used in this study was supported by NIH R01 grant (R01-AG023627) and the United Nations Fund for Population Activities. This study was supported by the National Natural Science Foundation of China (Grant No. 71110107025, No. 71173227, No. 71673313, and No. 71233001), the National Social Science Fund of China (Grant No. 13CJY028), and Training Program for Major Fundamental Research of Central University of Finance and Economics (Grant No. 14ZZD001).

Compliance with ethical standards


The collection of the data used in this study was supported by NIH R01 grant (R01-AG023627) and the United Nations Fund for Population Activities. This study was supported by the National Natural Science Foundation of China (Grant No. 71110107025, No. 71173227, No. 71673313, and No. 71233001), the National Social Science Fund of China (Grant No. 13CJY028), and Training Program for Major Fundamental Research of Central University of Finance and Economics (Grant No. 14ZZD001).

Conflict of interest

The authors declare that they have no conflict of interest.


  1. Barrientos A (2009) Social pensions in low-income countries. In: Holzmann R, Robalino D, Takayama N (eds) Closing the coverage gap: the role of social pensions and other retirement income transfers. The World Bank, Washington, DC, pp 73–84Google Scholar
  2. Becker GS (1981) A treatise on the family. Harvard University Press, CambridgeGoogle Scholar
  3. Becketti S, Gould W, Lillard L, Welch F (1988) The panel study of income dynamics after fourteen years: an evaluation. J Lab Econ 6:472–492CrossRefGoogle Scholar
  4. Benjamin D, Brandt L, Rozelle S (2000) Aging, wellbeing, and social security in rural northern china. Population Devel Rev 26:89–116Google Scholar
  5. Bethencourt C, Ríos-Rull J-V (2009) On the living arrangements of elderly widows. Int Econ Rev 50:773–801CrossRefGoogle Scholar
  6. Bian F, Logan JR, Bian Y (1998) Intergenerational relations in urban china: proximity, contact, and help to parents. Demography 35:115–124CrossRefGoogle Scholar
  7. Bloom HS (1984) Accounting for no-shows in experimental evaluation designs. Eval Rev 8:225–246CrossRefGoogle Scholar
  8. Cai F, Giles J, Meng X (2006) How well do children insure parents against low retirement income? An analysis using survey data from urban china. J Public Econ 90:2229–2255CrossRefGoogle Scholar
  9. Cai F, Giles J, Wang D (2009) The well-being of china’s rural elderly. Background Paper for East Asia Social Protection Team. The World Bank, Washington DCGoogle Scholar
  10. Cai F, Giles J, O'Keefe P, Wang D (2012) The elderly and old age support in rural china: challenges and prospects. World Bank, Washington DCCrossRefGoogle Scholar
  11. Chen X (2015) Old age pension and intergenerational living arrangements: a regression discontinuity design. Rev Econ Househ:1–22Google Scholar
  12. Chen X (2016) Old-age pension and extended families: how is adult children’s internal migration affected? Contemporary Econ Pol 34:646–659CrossRefGoogle Scholar
  13. Chen X, Silverstein M (2000) Intergenerational social support and the psychological well-being of older parents in china. Res Aging 22:43–65CrossRefGoogle Scholar
  14. Chen X, Hu L, Sindelar J (2015) Leaving money on the table? Pension enrollment decisions in rural china. Paper presented at the 7th IZA/CIER Annual Workshop on Research in Labor Economics, BeijingGoogle Scholar
  15. Cheng L, Liu H, Zhang Y, Zhao Z (2016) The health implications of social pensions: evidence from china’s new rural pension scheme. J Compar Econ, forthcoming. doi: 10.1016/j.jce.2016.12.002
  16. Connelly R, Maurer-Fazio M, Zhang D (2014) The role of coresidency with adult children in the labor force participation decisions of older men and women in china. IZA Discussion Paper, No. 8068Google Scholar
  17. Connelly R, Iannotti M, Maurer-Fazio M, Zhang D (2015) Coresidency, ethnicity, and happiness of China’s rural elders. Eurasian Geogr Econ 56:70–88CrossRefGoogle Scholar
  18. Costa DL (1997) Displacing the family: union army pensions and elderly living arrangements. J Polit Economy 105:1269–1292CrossRefGoogle Scholar
  19. Costa DL (1999) A house of her own: old age assistance and living arrangements of older nonmarried women. J Public Econ 72:39–60CrossRefGoogle Scholar
  20. Cox D (1987) Motives for private income transfers. J Polit Economy 95:508–546CrossRefGoogle Scholar
  21. Crum RM, Anthony JC, Bassett SS, Folstein MF (1993) Population-based norms for the mini-mental state examination by age and educational level. J Am Med Assoc 269:2386–2391CrossRefGoogle Scholar
  22. Ding W, Lehrer SF (2010) Estimating treatment effects from contaminated multiperiod education experiments: the dynamic impacts of class size reductions. Rev Econ Statist 92:31–42CrossRefGoogle Scholar
  23. Do YK, Malhotra C (2012) The effect of coresidence with an adult child on depressive symptoms among older widowed women in south korea: an instrumental variables estimation. J Gerontol B Psychol Sci Soc Sci 67:384–391CrossRefGoogle Scholar
  24. Dostie B, Léger PT (2005) The living arrangement dynamics of sick, elderly individuals. J Human Res 40:989–1014CrossRefGoogle Scholar
  25. Edmonds E, Mammen K, Miller DL (2005) Rearranging the family? Income support and elderly living arrangements in a low income country. J Human Res 40:186–207CrossRefGoogle Scholar
  26. Eggleston K, Sun A, Zhan Z (2016) The impact of rural pensions in China on labor migration. World Bank Econ Rev:lhw032. doi: 10.1093/wber/lhw032
  27. Engelhardt GV, Gruber J, Perry CD (2005) Social security and elderly living arrangements: evidence from the social security notch. J Human Res 40:354–372CrossRefGoogle Scholar
  28. Ermisch JF (1981) An economic theory of household formation. Theory and evidence from the general household survey. Scot J Polit Economy 28:1–19CrossRefGoogle Scholar
  29. Folstein MF, Folstein SE, McHugh PR (1975) “Mini-mental state”: a practical method for grading the cognitive state of patients for the clinician. J Psychiatr Res 12:189–198CrossRefGoogle Scholar
  30. Giles J, Mu R (2007) Elder parent health and the migration decision of adult children: evidence from rural china. Demography 44:265–288CrossRefGoogle Scholar
  31. Giles J, Wang D, Zhao C (2010) Can China’s rural elderly count on support from adult children? Implications of rural-to-urban migration. J Popul Ageing 3:183–204CrossRefGoogle Scholar
  32. Gu D (2008) General data quality assessment of the clhls. In: Yi Z, Poston DL, Vlosky DA, Gu D (eds) Healthy longevity in China. The springer series on demographic methods and population analysis, vol 20. Springer, Dordrecht, the Neitherlands, pp 39–60Google Scholar
  33. Hamoudi A, Thomas D (2014) Endogenous coresidence and program incidence: South africa’s old age pension. J Devel Econ 109:30–37CrossRefGoogle Scholar
  34. Hoerger TJ, Picone GA, Sloan FA (1996) Public subsidies, private provision of care and living arrangements of the elderly. Rev Econ Statist 78:428–440CrossRefGoogle Scholar
  35. Imbens GW, Angrist JD (1994) Identification and estimation of local average treatment effects. Econometrica 62:467–475CrossRefGoogle Scholar
  36. Jensen RT (2003) Do private transfers ‘displace’ the benefits of public transfers? Evidence from South Africa. J Public Econ 88:89–112CrossRefGoogle Scholar
  37. Johar M, Maruyama S (2011) Intergenerational cohabitation in modern Indonesia: filial support and dependence. Health Econ 20:87–104CrossRefGoogle Scholar
  38. Johar M, Maruyama S (2014) Does coresidence improve an elderly parent’s health? J Appl Econ 29:965–983CrossRefGoogle Scholar
  39. Jung J, Tran C (2012) The extension of social security coverage in developing countries. J Devel Econ 99:439–458CrossRefGoogle Scholar
  40. Kakwani N, Subbarao K (2005) Aging and poverty in africa and the role of social pensions. Social Protection Discussion Paper 521, The World Bank, Washington, DCGoogle Scholar
  41. Kochar A (2000) Parental benefits from intergenerational coresidence: empirical evidence from rural pakistan. J Polit Economy 108:1184–1209CrossRefGoogle Scholar
  42. Lei X, Zhang C, Zhao Y (2013) Incentive problems in china’s new rural pension program. Res Labor Econ 37:181–201CrossRefGoogle Scholar
  43. Lei X, Strauss J, Tian M, Zhao Y (2015) Living arrangements of the elderly in china: evidence from the CHARLS national baseline. China Economic J 8:191–214CrossRefGoogle Scholar
  44. Lewbel A (2007) Estimation of average treatment effects with misclassification. Econometrica 75:537–551CrossRefGoogle Scholar
  45. Li B (2007) Pension reform in china: who are left out? In: Cook IG, Powell J (eds) New perspectives on china and aging. NOVA Science Publishers, New York, pp 29–48Google Scholar
  46. Li LW, Zhang J, Liang J (2009) Health among the oldest-old in china: which living arrangements make a difference? Soc Sci Med 68:220–227CrossRefGoogle Scholar
  47. Liu G, Zhang Z (2004) Sociodemographic differentials of the self-rated health of the oldest-old Chinese. Population Res Pol Rev 23:117–133CrossRefGoogle Scholar
  48. Liu H, Sun Q, Zhao Z (2014) Social learning and health insurance enrollment: evidence from China’s new cooperative medical scheme. J Econ Behav Organ 97:84–102CrossRefGoogle Scholar
  49. Manacorda M, Moretti E (2006) Why do most Italian youths live with their parents? Intergenerational transfers and household structure. J Eur Econ Assoc 4:800–829CrossRefGoogle Scholar
  50. Maruyama S (2015) The effect of coresidence on parental health in Japan. J Japanese Int Economies 35:1–22CrossRefGoogle Scholar
  51. Maruyama S, Johar M (2016) Do siblings free-ride in ‘being there’ for parents? Quantitative Economics, forthcomingGoogle Scholar
  52. Maurer-Fazio M, Connelly R, Chen L, Tang L (2011) Childcare, eldercare, and labor force participation of married women in urban china, 1982–2000. J Human Res 46:261–294CrossRefGoogle Scholar
  53. McGarry K, Schoeni RF (2000) Social security, economic growth, and the rise in elderly widows’ independence in the twentieth century. Demography 37:221–236CrossRefGoogle Scholar
  54. Meng X, Luo C (2008) What determines living arrangements of the elderly in urban China. In: Gustafsson BA, Li S, Sicular T (eds) Inequality and public policy in china. Cambridge University Press, Cambridge, pp 267–286Google Scholar
  55. Michael RT, Fuchs VR, Scott SR (1980) Changes in the propensity to live alone: 1950–1976. Demography 17:39–56CrossRefGoogle Scholar
  56. Mihelic AH, Crimmins EM (1997) Loss to follow-up in a sample of Americans 70 years of age and older: the LSOA 1984–1990. J Gerontol B Psychol Sci Soc Sci 52B:S37–S48CrossRefGoogle Scholar
  57. Mutchier JE, Burr JA (1991) A longitudinal analysis of household and nonhousehold living arrangements in later life. Demography 28:375–390CrossRefGoogle Scholar
  58. Ning M, Gong J, Zheng X, Zhuang J (2016) Does new rural pension scheme decrease elderly labor supply? Evidence from CHARLS. China Econ Rev 41:315–330CrossRefGoogle Scholar
  59. Palacios R, Sluchynsky O (2006) Social pensions part i: their role in the overall pension system. Social Protection Discussion paper 36237, the World Bank, Washington, DCGoogle Scholar
  60. Palmer E, Deng Q (2008) What has economic transition meant for the well-being of the elderly in china. In: Gustafsson BA, Li S, Sicular T (eds) Inequality and public policy in china. Cambridge University Press, Cambridge, pp 182–203CrossRefGoogle Scholar
  61. Pezzin LE, Schone BS (1999) Intergenerational household formation, female labor supply and informal caregiving: a bargaining approach. J Human Res 34:475–503CrossRefGoogle Scholar
  62. Pezzin LE, Kemper P, Reschovsky J (1996) Does publicly provided home care substitute for family care? Experimental evidence with endogenous living arrangements. J Human Res 31:650–676CrossRefGoogle Scholar
  63. Rosenzweig M, Zhang J (2014) Co-residence, life-cycle savings and inter-generational support in urban china. National Bureau of Economic Research Working Paper No. 20057Google Scholar
  64. Shen C, Williamson JB (2010) China’s new rural pension scheme: can it be improved? Int J Sociol Soc Policy 30:239–250CrossRefGoogle Scholar
  65. Shi SJ (2006) Left to market and family–again? Ideas and the development of the rural pension policy in China. Soc Policy Adm 40:791–806CrossRefGoogle Scholar
  66. Silverstein M, Chen X, Heller K (1996) Too much of a good thing? Intergenerational social support and the psychological well-being of older parents J Marriage Fam 58:970–982Google Scholar
  67. Silverstein M, Cong Z, Li S (2006) Intergenerational transfers and living arrangements of older people in rural China: consequences for psychological well-being. J Gerontol B Psychol Sci Soc Sci 61:S256–S266CrossRefGoogle Scholar
  68. State Council (2009) Guiding suggestions of the state council on developing new rural pension scheme pilot. Document 32 [In Chinese.] Accessed March 13, 2017(link:
  69. Terza JV, Basu A, Rathouz PJ (2008) Two-stage residual inclusion estimation: addressing endogeneity in health econometric modeling. J Health Econ 27:531–543CrossRefGoogle Scholar
  70. Thøgersen S, Anru N (2008) ‘He is he, and I am I’: individual and collective among China’s rural elderly. Eur J East Asian Stud 7:11–37CrossRefGoogle Scholar
  71. Yamada K (2006) Intra-family transfers in Japan: intergenerational co-residence, distance, and contact. Appl Econ 38:1839–1861CrossRefGoogle Scholar
  72. Yip W, Hsiao WC (2009) Non-evidence-based policy: how effective is China’s new cooperative medical scheme in reducing medical impoverishment? Soc Sci Med 68:201–209CrossRefGoogle Scholar
  73. Zeng Y, Wang Z (2003) Dynamics of family and elderly living arrangements in China: new lessons learned from the 2000 census. China Rev 3:95–119Google Scholar
  74. Zeng Y, Vaupel JW, Zhenyu X, Chunyuan Z, Yuzhi L (2002) Sociodemographic and health profiles of the oldest old in China. Population Devel Rev 28:251–273CrossRefGoogle Scholar
  75. Zhang C, Giles J, Zhao Y (2014) Policy evaluation of China’s new rural pension program: income, poverty, expenditure, subjective wellbeing and labor supply. China Econ Q 14:203–230Google Scholar

Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Nanjing UniversityNanjingChina
  2. 2.Central University of Finance and EconomicsBeijingChina
  3. 3.Renmin University of ChinaBeijingChina

Personalised recommendations