Do pension subsidies reduce household education expenditure inequality? Evidence from China

Abstract

This study focuses on the effect of pension subsidies on inequality in household education expenditures using data from the China Family Panel Studies for 2010, 2012 and 2014. Estimates from fixed effects (FE) models and instrumental variables (IV) methods show that New Rural Pension Scheme (NRPS) subsidies significantly reduce inequality in education expenditures among rural households. Further evidence suggests that pension subsidies significantly increase education expenditures of rural low- and middle-income households. Our study suggests that pension subsidies play an important role in reducing inequality in household education expenditures. Especially for low- and middle-income households, government welfare policies targeting the elderly may have longer-term benefits than expected.