Public Pension Programs Research Articles

Barriers to Saving for Retirement: Evidence from a Public Pension Program in Mongolia

Barriers to Saving for Retirement: Evidence from a Public Pension Program in Mongolia

Do public pension programmes reduce elderly poverty in China?

AbstractThis paper studies the impact of public programmes aiming to cover the entire population in China on elderly poverty in both rural and urban China. Using the three rounds of panel data based on the China Health and Retirement Longitudinal Study in 2011–2015, we examine whether public pension programmes reduced elderly poverty, comprehensively defined to cover both unidimensional and multidimensional poverty indices of the households and individuals. To utilise the longitudinal nature of the data, we apply the robust fixed‐effects (FE) model with propensity score matching (PSM) and the FE quantile model with PSM taking into account the unobservable individual characteristics. Our results show that public pension programmes reduced poverty in monetary and non‐monetary terms in rural areas, while the effect on labour market is not significant. The panel quantile regression results suggest that the programmes decreased inequality in both monetary and non‐monetary dimensions. However, poverty‐reducing and inequality‐reducing effects are not observed in urban areas. Our results provide strong evidence to underscore the success of the Chinese public pension programme in reducing poverty and inequality in both rural and urban areas.

Effect of compulsory education on retirement financial outcomes: evidence from China*

AbstractThis paper presents the first causal evidence that compulsory education improves retirement financial outcomes in a developing economy. By exploiting the 1986 compulsory schooling reform in China, we show that compulsory education increases rural residents’ participation in the New Rural Pension Scheme, the world’s largest public pension program. Using an instrumental variables strategy in a difference‐in‐differences framework, we find that an additional year of schooling significantly increases pension participation by 3.5 percentage points, and this positive result is more prominent among women. Mechanism analysis suggests that cognition and access to information are essential pathways in the education–pension nexus.

Enrollment in public pension program and household land transfer behaviour: Evidence from rural China

ABSTRACT Although farmland transfer is a radical solution to the problem of sustainable development of the land rental market in China, there is insufficient research that attempted to quantitatively explore the determinants of land transfer behaviour, particularly the effects of enrolment in public pension programs. In this paper, we examine how enrolment in the recently established and expanded New Rural Pension Scheme (NRPS) can affect land transfer decisions among the age-eligible and age-ineligible rural residents. Specifically, our study employs balanced panel data from the first two waves of the China Family Panel Studies (CFPS) in the year 2010 and 2012. It reveals that, although the enrolment in the public pension system increases the scale of farmland transfer among age-eligible people, this effect is not shown among age-ineligible members. Moreover, for households with members over the age of 60, the positive income effects are concentrated among farmers from low-income family; for other groups, the heterogeneous outcomes are insignificant. These estimates may offer insights for the dynamic adjustments of the public pensions for the elderly population and for enhancing the vitality of land transfer in rural China.

A public micro pension programme in Brazil: heterogeneity among states and setting up of a benefit age adjustment

Brazil is the 5th largest country in the world, despite having a “High Human Development”, it is the 9th most unequal country. The existing Brazilian micro pension programme is one of the safety nets for poor people. To become eligible for this benefit, each individual must have an income that is less than a quarter of the Brazilian minimum wage and be either over 65 or considered disabled. That minimum income corresponds to approximately US $\(\,2\) per day. This manuscript analyses quantitatively some aspects of this programme in the Public Pension System of Brazil. We look for the impact of some particular economic variables on the number of people receiving the benefit, and seek if that impact significantly differs among the 27 Brazilian Federal Units (UF). We search for heterogeneity. We perform a regression and spatial cluster analysis for detection of geographical grouping. We use a database that includes the entire population receiving the benefit. Afterwards, we calculate the amount that the system spends with the beneficiaries, estimate values per capita and the weight of each UF, searching for heterogeneity reflected on the amount spent per capita. In this latter calculation we use a more comprehensive database, by individual, that includes all people that started receiving a benefit under the programme between January and April 2018. We compute the expected discounted benefit and confirm a high heterogeneity among UF’s as well as by gender. We propose looking for a more equitable system by introducing “age adjusting factors” to change the benefit age.

Fifty years of welfare state generosity

AbstractThis article describes an overview of key findings from the Comparative Welfare Entitlements Project (CWEP). CWEP compiles major features of the generosity of unemployment, sickness and public pension programs over the last several decades in 21 countries. Describing and extending earlier work to measure the institutional variation in major social insurance programs over time, we provide previously unpublished methodological details of widely used measures of program generosity; measures which have appeared in over 200 analyses during the last decade and a half. We find a high level of variation in wage replacement and benefit conditionality across programs in most countries; calling into question the notion of an historically stable configurations of characteristics, at least during the last 45 years. For instance, our research shows that several prototypical social democratic welfare states experienced the highest declines in generosity in the last three decades. Furthermore, we also show that, as late as the mid‐1970s, some ‘social democratic’ welfare states still trailed some ‘conservative’ welfare states, including prototypical ones like Germany.

The impact of the Public Pension Program on the elderly’s medical expenditures: a regression discontinuity approach

ABSTRACT The surge in aging societies has increased the relevance of retirement as a research topic. Utilizing the public data obtained from the China Family Panel Studies, this paper applies a regression discontinuity approach to assess the impact of China’s current Public Pension Program on the medical expenditures of the elderly. The results reveal that the Public Pension Program increases out-of-pocket medical expenditures, hospitalization expenditures, and other injury and illness expenses. The results also report that being insured by Basic Social Health Insurance has a mitigating effect on the medical expenditures of the elderly; furthermore, there are significant differences in the use of medical resources between regions and urban and rural areas in China. Therefore, ensuring the sustainability of pension funds and social health insurance funds and developing customized private insurance according to areas can play a positive role in improving the use of medical resources and relieving the medical burden on the elderly population.

On reserve fund investment of public pension programs and the structure of flow of funds

On reserve fund investment of public pension programs and the structure of flow of funds

Whom Can I Rely on? The Impact of China's Public Pension Program Expansion on the Expectations for Old-Age Support

Aging is a global trend and China is no exception. Older people in China mostly rely on their adult children for old-age support. This traditional provision pattern of old-age support, however, is challenged by hundreds of millions of internal migrant workers. They relocate from rural to urban regions for better employment and are no longer able to provide old-age support to their older parents in rural areas. The aim of this study was to determine the impacts of China’s public pension program expansion in rural areas on older people’s expectations for old-age support. Utilizing the natural experiment of program expansion, this study identified an instrumental variable as the county adoption of the pension program. In addition, the study analyzed a nationally representative longitudinal dataset CHARLS with fixed effects model. Results from the statistical model showed that given the participation in the pension program, older adults reported more reliance on pension for old-age support financially and less reliance on children. Heterogeneous effects were found for older adults living together with children and older adults living independently. These important findings suggest that the government partially assumes the responsibility for the old-age support of adult children in the traditional sense. The potential benefits of this study provide a policy implication for developing countries to alleviate old-age support problems and enable internal migration for economic development.

Sustainable and equitable pensions with means testing in aging economies

A means-tested pension system has a distinct feature that tailors the level of pension benefits according to individual economic status. In the context of population aging with widening gaps in life expectancies, we show that this feature generates an automatic mechanism that (i) mitigates the pressing fiscal cost of an old-age public pension program (fiscal stabilization device) and (ii) redistributes pension benefits to those in need with shorter life expectancies (redistributive device). To evaluate this automatic mechanism, we employ an overlapping generations model with population aging. Our results indicate that this novel mechanism plays an important role in containing the adverse effects of population aging on the fiscal costs and enhancing the progressivity of a pension system. More pronounced aging scenarios further strengthen the role of this mechanism. A well-designed means test rule can create a sufficiently strong automatic mechanism to keep public pensions sustainable and progressive under population aging.

The Effect of Compulsory Education on Retirement Financial Outcomes: Evidence from China

Retirement planning has become an increasingly important component of individual financial decision making. This paper presents the first causal evidence that compulsory education improves retirement financial outcomes in a developing economy. Exploiting the 1986 compulsory schooling reform in China, we show that compulsory education increases rural residents’ participation in the New Rural Pension Scheme, the world’s largest public pension program. Using the instrumental variable strategy in a Difference-in-Differences framework, we find that an additional year of schooling significantly increases pension participation by 3.5 percentage points, and this positive result is more prominent among women. Mechanism analysis suggests that cognition, access to information, and financial literacy are essential pathways in the education-pension nexus.

The evolution of labor force participation and the expected length of retirement in Brazil

Population aging and recent trends in labor force participation rates are creating a considerable impact on public pension programs around the world. Brazil combines a sizeable public pension program, rapid population aging and a decline in the labor force of the elderly, imposing additional costs to the sustainability of the pension programs. In this paper, we investigate the length of retirement in Brazil and analyze the evolution of labor force participation rates and retirement from the late '70 s and forecast future trends labor force participation and duration of retirement. We use the Lee-Carter model to forecast labor force participation rates and combine those estimates to United Nations mortality forecasts to estimate the expected length of retirement to 2035. We find a steady decline in the labor force participation of young and older adults over time, mostly due to access to education and public pension programs. In contrast, for females, we observed a constant increase in the participation for the women in reproductive ages. Our forecasts indicate that older adults' labor force will decline in the future to levels compared to more developed economies. They also suggest that the expected length of retirement might increase from 12.5% to about 20%, from 1993 to 2035, of males adult working lives and from 11.47% to 27.41% for females. These trends, associated with population aging and longer life expectancy, reduce the ratio between workers and retirees, affecting the basic premise of the pay-as-you-go (PAYGO) system. The proposed model to forecast labor force rates works well in Brazil's case and provides essential insights into the future of the system. Analysis of pension sustainability should consider population aging as well as trends in labor force rates.

Examining how elderly employment is associated with institutional disincentives in Japan

This study examines how the decisions of the elderly with respect to work, retirement, and hours to work relate to the public pension and other relevant programs by constructing a single index of implicit tax that incorporates various factors related to institutional disincentives to working in Japan. Our regression model underscores that public pension and other related programs, taken together, discourage the elderly from working. Based on the regression results, we conduct simulations to show the extent to which the three policy reforms can encourage the elderly to stay in the labor force longer and work longer hours: (1) abolishing the earnings test for pension benefits; (2) raising the eligibility age for pension benefits; and (3) extending the wage subsidy for the elderly. The simulation results highlight the relative effectiveness of raising the eligibility age.

Is There a Limit to Human Life Expectancy?

The analysis and prediction of life expectancy trends hold an important role in many aspects of our society. On a macro level, governments rely on life expectancy data to make decisions about public welfare programs, health care, retirement age, and pension programs. On an individual level, many people take life expectancy data into account when planning their retirements and making decisions about their future. Currently, two main schools of thought dominate the debate on the trajectory of life expectancy trends. The Olshansky School argues that global human life expectancy is reaching its absolute limit and predicts that a worldwide plateau in life expectancy will soon be reached. The Vaupel School, however, believes that such a plateau is nowhere in sight, and that humans possess no biological barrier that will prevent life expectancy from increasing indefinitely. In this commentary, I build upon the evidence generated by the Vaupel School by introducing socioeconomic factors into the debate and I argue that with consistent improvements to medical technology and general prosperity we will not encounter a biological limit to human life expectancy in our lifetimes.

Influence modeling: Mathematical programming representations of persuasion under either risk or uncertainty

Abstract Persuasion is a fundamental element of human interaction applied to both individuals and populations. Although persuasion is a well-studied, interdisciplinary field of research, this work advances its prescriptive, quantitative characterization, and future use. That is, this research complements the qualitative psychological literature with respect to the processing of persuasive messages by developing mathematical programming formulations to identify an optimal influence campaign. We adapt the classic Decision Analysis problem to a bilevel mathematical program, wherein a persuader has the opportunity to affect the environment prior to the decisionmaker’s choice. Thereby, we define a new class of problems for modeling persuasion. Utilizing Cumulative Prospect Theory as a descriptive framework of choice, we transform the persuasion problem to a single level mathematical programming formulation, adaptable to conditions of either risk or uncertainty. These generalized models allow for the malleability of prospects as well as Cumulative Prospect Theory parameters through persuasion update functions. We detail the literature that supports the quantification of such effects which, in turn, establishes that such update functions can be realized. Finally, the efficacy of the model is illustrated through three use cases under varying conditions of risk or uncertainty: the establishment of insurance policies, the construction of a legal defense, and the development of a public pension program.

Federalism and the politics of the Canada and Quebec Pension Plans

AbstractDrawing on the literature on federalism and public policy, the present article explores the recent politics of two highly-similar and closely integrated Canadian public pension programs created in the mid-1960s: the Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP). This article argues that the parallel evolution of CPP/QPP can be understood by examining how the unique jurisdictional arrangements for the CPP/QPP interacted with other factors to generate by these linked programs have led to the emergence of specific federalism policy dynamics, while muting or foreclosing other potential policy dynamics. As shown, governments have engaged in a process of ‘collusive benchmarking’ that has limited the scope of the available policy options. Differing demographic trends in Quebec and the ‘Rest of Canada’ have strained but also reinforced this policymaking dynamic in recent years. Simultaneously, intergovernmental race to the top dynamics have facilitated the recent push for both CPP and, later, QPP expansion.

Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China

Ageing populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects as adult children who make income contributions to their parents could adjust their behavior to changes in their parents' income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of receiving transfers from adult children in the context of a large middle-income country and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both high-income and middle-income countries.

Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China

Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents’ income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries.

Do Private Household Transfers to the Elderly Respond to Public Pension Benefits? Evidence from Rural China

Aging populations in developing countries have spurred the introduction of public pension programs to preserve the standard of living for the elderly. The often-overlooked mechanism of intergenerational transfers, however, can dampen these intended policy effects, as adult children who make income contributions to their parents could adjust their behavior in response to changes in their parents' income. Exploiting a unique policy intervention in China, we examine using a difference-in-difference-in-differences (DDD) approach how a new pension program impacts inter vivos transfers. We show that pension benefits lower the propensity of adult children to transfer income to elderly parents in the context of a large middle-income country, and we also estimate a small crowd-out effect. Taken together, these estimates fit the pattern of previous research in high-income countries, although our estimates of the crowd-out effect are significantly smaller than previous studies in both middle- and high-income countries.

The Effect of Workplace Pensions on Household Saving: Evidence From a Natural Experiment in Taiwan

AbstractPopulation aging causes financial imbalances in pay‐as‐you‐go public pension programs. To remedy this problem, while ensuring the adequacy of retirement savings for employees, many countries complement or substitute public pensions by regulating their workplace pensions. This article exploits a pension reform in Taiwan that has mandated, since 2005, that all private‐sector employers contribute at least 6 percent of an employee's monthly wage to an individual pension account. I use workers in the unaffected sectors as a comparison group and employ a difference‐in‐differences method to estimate the impact of the reform on household saving rates. My estimates suggest that making private pensions mandatory significantly reduces the household saving rate by between 2.06 and 2.45 percentage points, thus implying that a $ 10 increase in the workplace pension could offset $ 5 to $ 6 of household savings.