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Can China's new rural pension scheme alleviate the relative poverty of rural households? An empirical analysis based on the PSM‐DID method

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  • Limin Wen
  • Shufang Sun

Abstract

Based on five‐period panel data from the China Family Panel Studies 2010–2018, this paper uses the propensity score matching difference‐in‐differences (PSM‐DID) method to comprehensively evaluate the effects of the New Rural Pension Scheme (NRPS) on alleviating rural households' relative poverty. At the same time, based on the theory of sustainable livelihoods of rural households, the mediating effects model is applied to analyse the mechanism of rural households' livelihood capital. The results of the study are as follows. (1) The NRPS helps alleviate the relative poverty of rural households. (2) The livelihood capital of rural households is an important mechanism for the NRPS to alleviate the relative poverty of rural households, and social capital, financial capital, and human capital all play a part in the mediating effect. (3) The results of the heterogeneity tests based on the stage of rural households' participation in the NRPS and the region of participation in the NRPS indicate that the governance effects of the NRPS on rural households' relative poverty are more significant among households in the contributory stage and the central and western regions. Additionally, the results are supported by robustness tests, such as replacing the dependent variable and the PSM method. The findings of this paper have important implications for the establishment of a long‐term mechanism to address relative poverty and the construction of a more efficient and inclusive rural social pension insurance system in China and other developing countries.

Suggested Citation

  • Limin Wen & Shufang Sun, 2023. "Can China's new rural pension scheme alleviate the relative poverty of rural households? An empirical analysis based on the PSM‐DID method," Australian Economic Papers, Wiley Blackwell, vol. 62(3), pages 396-429, September.
    • Handle: RePEc:bla:ausecp:v:62:y:2023:i:3:p:396-429
    DOI: 10.1111/1467-8454.12295
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