Crowding in or Out？National Public Pension, Inter-Generational Contract, and Family Support to Empty-Nest Older Parents in Rural China

Abstract

ABSTRACT Evidence to date has been inconclusive on the effects of public pension on family support to older adults, and the underlying mechanism behind such effects remains unclear. This study examines the effects of the New Rural Social Pension Scheme on family support to empty-nest older parents in rural China, where family care is traditionally favored for older adults. Using data from the China Longitudinal Aging Social Survey, the findings reveal that pension receipt promotes bidirectional financial transfers and intimate relationships between generations, thus increasing (or crowding in) children’s financial and care support to their empty-nest parents. On the other hand, receiving pensions may discourage parental care support to children and partially decrease (or crowd out) children’s financial and care support. This crowding-out effect, however, is limited and thus insufficient for counteracting the crowding-in effects from other pathways. Overall, these findings indicate that national welfare, such as pensions, can encourage family support through inter-generational contracts and intimacy, strengthening familial bonds and facilitating mutual assistance within families. For policy implications, government should prioritize improving benefit levels of public pensions to harness the caregiving potential of families and providing essential services that assist families in addressing care burdens.