Access to Pensions, Old-Age Support, and Child Investment in the People’s Republic of China

ACCESSTOPENSIONS,OLD-AGESUPPORT,AND CHILDINVESTMENTINTHEPEOPLE’SREPUBLICOFCHINA XiaoyueShanandAlbertPark NO.682 May2023 ADBECONOMICSWORKINGPAPERSERIES ASIANDEVELOPMENTBANK ADBEconomicsWorkingPaperSeries AccesstoPensions,Old-AgeSupport,andChildInvestmentinthePeople’sRepublicofChina XiaoyueShanandAlbertParkNo.682|May2023 XiaoyueShan(xiaoyues@wharton.upenn.edu) isapostdoctoralresearcherattheWhartonSchool,UniversityofPennsylvania.AlbertPark(afpark@adb.org)istheChiefEconomistandDirectorGeneraloftheEconomicResearchandRegionalCooperationDepartment,AsianDevelopmentBank. TheADBEconomicsWorkingPaperSeriespresentsresearchinprogresstoelicitcommentsandencouragedebateondevelopmentissuesinAsiaandthePacific.TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesofADBoritsBoardofGovernorsorthegovernmentstheyrepresent. ASIANDEVELOPMENTBANK CreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO) ©2023AsianDevelopmentBank 6ADBAvenue,MandaluyongCity,1550MetroManila,PhilippinesTel+63286324444;Fax+63286362444 www.adb.org Somerightsreserved.Publishedin2023. ISSN2313-6537(print),2313-6545(electronic)PublicationStockNo.WPS230161-2 DOI:http://dx.doi.org/10.22617/WPS230161-2 TheviewsexpressedinthispublicationarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesoftheAsianDevelopmentBank(ADB)oritsBoardofGovernorsorthegovernmentstheyrepresent. ADBdoesnotguaranteetheaccuracyofthedataincludedinthispublicationandacceptsnoresponsibilityforanyconsequenceoftheiruse.ThementionofspecificcompaniesorproductsofmanufacturersdoesnotimplythattheyareendorsedorrecommendedbyADBinpreferencetoothersofasimilarnaturethatarenotmentioned. Bymakinganydesignationoforreferencetoaparticularterritoryorgeographicarea,orbyusingtheterm“country”inthisdocument,ADBdoesnotintendtomakeanyjudgmentsastothelegalorotherstatusofanyterritoryorarea. ThisworkisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)https://creativecommons.org/licenses/by/3.0/igo/.Byusingthecontentofthispublication,youagreetobeboundbythetermsofthislicense.Forattribution,translations,adaptations,andpermissions,pleasereadtheprovisionsandtermsofuseathttps://www.adb.org/terms-use#openaccess. ThisCClicensedoesnotapplytonon-ADBcopyrightmaterialsinthispublication.Ifthematerialisattributedtoanothersource,pleasecontactthecopyrightownerorpublisherofthatsourceforpermissiontoreproduceit.ADBcannotbeheldliableforanyclaimsthatariseasaresultofyouruseofthematerial. Pleasecontactpubsmarketing@adb.orgifyouhavequestionsorcommentswithrespecttocontent,orifyouwishtoobtaincopyrightpermissionforyourintendedusethatdoesnotfallwithintheseterms,orforpermissiontousetheADBlogo. CorrigendatoADBpublicationsmaybefoundathttp://www.adb.org/publications/corrigenda.Notes: Inthispublication,“$”referstoUnitedStatesdollarsand“CNY”referstoyuan. ADBrecognizes“China”asthePeople’sRepublicofChina. TheADBEconomicsWorkingPaperSeriespresentsdata,information,and/orfindingsfromongoingresearchandstudiestoencourageexchangeofideasandtoelicitcommentandfeedbackaboutdevelopmentissuesinAsiaandthePacific.Sincepapersinthisseriesareintendedforquickandeasydissemination,thecontentmayormaynotbefullyeditedandmaylaterbemodifiedforfinalpublication. ABSTRACT Thispaperstudieshowaccesstopublicpensionsaffectsold-agesupportandchildinvestmentintraditionalsocieties.Guidedbypredictionsfromanoverlappinggenerationsmodel,weanalyzetheinfluencesofanewpensionprograminruralPeople’sRepublicofChina,usingadifference-in-differencesapproach.Wefindthattheprogramcrowdsouttransfersfromworking-ageadults,especiallymen,totheirelderlyparents.Interestingly,theimpactonchildinvestmentsignificantlydiffersbychildgender.Whileadultparentsincreaseeducationalinvestmentinsons,theirinvestmentindaughtersappearstodecrease.Ourfindingshighlighttheunintendedconsequencesofpublicpensionsonparentalinvestment. Keywords:altruism,pension,old-agesupport,ruralPRC,intergenerationaltransfers JELcodes:D64,H55,J14,J16 TheauthorswouldliketothankAnneBrenøe,LachlanDeer,GiuseppeSorrenti,UlfZölitz,seminarparticipantsattheUniversityofZurich,aswellasconferenceparticipantsattheSocietyofLaborEconomists24thAnnualMeeting(Arlington),the9thAnnualAPRUResearchConferenceonPopulationAging(HongKong,China),theInternationalConferenceontheEconomicsofAging(Beijing),andthe2ndAnnualWorkshoponPopulationAgingandtheChineseEconomy(Sydney)fortheirhelpfulcommentsandsuggestions. 1.Introduction Manypeopleindevelopingcountrieshavenoaccesstoold-agepensions.Traditionalpensionschemesfinancedbyemployersandemployeesusuallydonotcoverruralfarmersandworkersintheinformalsector.Thishasledagrowingnumberofcountriestointroducepublicpensionprograms.1Suchpensionreformshave,forthefirsttime,madepensionswidelyavailabletopeoplewhotraditionallyrelyuponchildrenforsupportinoldage.Astheexpectedrelianceonchildrenforold-agesupportalsomotivatesparents’investmentintheirchildren,theintroductionofpensionsmayirrevocablyaltertheinterdependencebetweenparentsandchildren. Inthispaper,weexaminehowaccesstopensionsaffectstwodimen