Abstract
Benefit incidence analyses provide important insights into problems facing any government struggling to deliver essential and equitable social services. Utilizing the framework of the National Transfer Accounts Project, this paper analyzes the benefit incidence of public transfers across generations and socioeconomic groups in the People’s Republic of China in 2009. Public education transfers were equally distributed by residence, gender, and income groups at the primary and secondary levels but favored city dwellers, females, and the wealthy at the tertiary level. Public health-care programs tended to equally target the young and middle-aged from different socioeconomic groups but tilted toward urban dwellers, males, and higher income groups at older ages. Public pension spending strongly favored high-income groups, with rural residents, females, and lower income groups receiving greatly reduced benefits. Our results also indicate that total public spending favored elderly people as spending per person 65 years and older was twice that per child younger than 19. In the next 10 or 20 years, the government should endeavor to improve and strengthen public support systems. In addition to this effort, the currently fragmented health insurance system and pension system should move toward a unified system to reduce inequalities in benefit incidence across socioeconomic groups.
Highlights
Three decades of virtually uninterrupted hyper economic growth have propelled the People’s Republic of China (PRC) into the ranks of middle-income countries
In addition to broader coverage, it is essential to know whether disadvantaged groups, such as rural dwellers, females, or the poor, benefit more from public transfers in order to justify them as a rationale for public spending
Despite the strong interest most people in the PRC have in the well-being of children, per capita public spending on children was relatively modest, while the amount spent on health care and pensions for the elderly was greater
Summary
Three decades of virtually uninterrupted hyper economic growth have propelled the People’s Republic of China (PRC) into the ranks of middle-income countries. A second distinctive feature of public transfers is to reallocate resources from the working-age population to both children and the elderly in terms of education, health care, and pensions (Lee 2003) This suggests that public transfers are unevenly distributed across generations. A more recent study in Latin American countries (Turra, Holz, and Cotlear 2011) showed that the distribution of public transfers across income groups and the distribution of these transfers across generations are not independent; instead, they are closely related to each other They found that much of the regressive nature of public expenditures across income groups in Brazil and Chile was due to generational allocations as public spending was almost neutral in education, lightly progressive in health care, and strongly regressive in public pensions.
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