Crowding out or crowding in? The interaction between public pensions and private transfers in China

Abstract

ABSTRACT Public pensions and intergenerational family support are among the most important and well-researched income sources for older individuals in many societies. However, the interactions between them have received less attention. A few exceptions discuss if public transfers ‘crowd out’ private transfers. Yet, these studies in developed welfare states are considered misplaced due to their ‘fait accompli’ support arrangements. Furthermore, the cultural and symbolic value of support is often overlooked in these debates. Focusing on the case of China, where family support is institutionalized and public pension coverage is expanding, this study aims to contribute to the ‘crowding-out’ debates by examining intergenerational family transfers following the recent public pension reforms. Based on Heckman two-step regression analyses of the China Health and Retirement Longitudinal Study (2011–2015), the study shows that the ‘crowding-out’ and ‘crowding-in’ effects of public pensions co-exist. The long-established employee pension schemes reduced child-to-parent transfers, but increased parent-to-child transfers. More importantly, access to the new resident pensions, rather than displacing family support, has in effect ‘crowded in’ more child-to-parent transfers. These findings provide new insights into the dynamics between working-age and older generations, as well as between the state and family concerning their roles in welfare provision.