Have pensions reduced the relative poverty? ----- empirical analysis from China CHARLS data

Abstract

According to its function as increasing disposable income, pension is believed to reduce absolute poverty of recipients. However, nowadays, researchers haven't reached the consensus on whether pensions reduce the relative poverty or not. Given the data from the China Health and Retirement Longitudinal Study (CHARLS) 2018, this study investigates on if pension has positive effect on the reduction of relative poverty by performing the heteroskedastic probit model with 2SLS and IV estimators.The result shows that: (1) Pension has a noticeable ani-poverty effects. Three relative poverty line charts indicate a decrease by 4.8 %, 4.28 % and 4.39 % in the probability of beneficiaries falling into relative poverty for each 1 % increase in pensions. (2) Pension contributes greatly to relative poverty reduction at the regional level, this contribution appears to have an urban-rural heterogeneity, with features of central > western > eastern and rural > town. (3) Pension increases the effect to improve the relative poverty through the mediating effect of intergenerational support from children. (4) To improve relative poverty situation, individual health status shows a positive moderating effect on pensions. For recipients with good health status, their probability of falling into relative poverty are less likely than the others.