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Should China introduce a social pension?

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  • Lu, Bei
  • He, Wenjiong
  • Piggott, John

Abstract

In spite of recent policy innovations, more than half China’s population have little cash benefit entitlement in later life. This paper calculates the revenue costs of a universal social pension scheme for China, using the poverty line as the standard for pension benefit. We provide new estimates of longevity into the future using the Lee-Carter approach. Alternative benefit scenarios are used to assess the burden of the plan on younger generations. Our central case estimates lie in the range of 0.7–1% of GDP annually, over a 40year horizon, set at the current poverty line of about 6.6% of GDP per capita, with retirement age increased to 65, and assuming that those with formal pension entitlement are excluded. With more generous benefits, lower retirement age, and lower than expected fertility, however, costs can be as high as 4.5% of GDP.

Suggested Citation

  • Lu, Bei & He, Wenjiong & Piggott, John, 2014. "Should China introduce a social pension?," The Journal of the Economics of Ageing, Elsevier, vol. 4(C), pages 76-87.
    • Handle: RePEc:eee:joecag:v:4:y:2014:i:c:p:76-87
    DOI: 10.1016/j.jeoa.2013.12.001
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    1. Noriyuki Takayama & Martin Werding (ed.), 2011. "Fertility and Public Policy: How to Reverse the Trend of Declining Birth Rates," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262014513, April.
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    4. Palacios, Robert & Sluchynsky, Oleksiy, 2006. "Social pensions Part I : their role in the overall pension system," Social Protection Discussion Papers and Notes 36237, The World Bank.
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    Cited by:

    1. Ce Shen & Jessica Johnson & Zhenhe Chi & John B. Williamson, 2020. "Does a universal non‐contributory social pension make sense for rural China?," International Social Security Review, John Wiley & Sons, vol. 73(2), pages 3-26, April.
    2. Frieden, Rob, 2017. "Grey nuances in the black and white debate over subsidized Internet access," Telecommunications Policy, Elsevier, vol. 41(10), pages 1017-1026.
    3. İmrohoroğlu, Ayşe & Zhao, Kai, 2018. "The chinese saving rate: Long-term care risks, family insurance, and demographics," Journal of Monetary Economics, Elsevier, vol. 96(C), pages 33-52.
    4. Xu, Hongwei, 2019. "Physical and mental health of Chinese grandparents caring for grandchildren and great-grandparents," Social Science & Medicine, Elsevier, vol. 229(C), pages 106-116.
    5. Lu, Bei & Yang, Mingxu & Cumming, Robert G. & Stanaway, Fiona F., 2020. "Falls and impact on disability and healthy life expectancy in China: Evidence from the China Health and Retirement Longitudinal Survey (CHARLS)," China Economic Review, Elsevier, vol. 61(C).

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