Leaving Money on the Table? Suboptimal Enrollment in the New Social Pension Program in China

36 Pages Posted: 6 Dec 2017

See all articles by Xi Chen

Xi Chen

Department of Health Policy and Management; Yale University - Department of Economics; Yale University - Yale Institution for Social and Policy Studies; IZA

Lipeng Hu

Peking University - National School of Development

Jody L. Sindelar

Yale University - School of Public Health; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: November 2017

Abstract

China’s recently implemented New Rural Pension Scheme (NRPS), the largest social pension program in the world, was designed to provide financial protection for its rural population and reduce economic inequities. Yet the impact of this program is mitigated if those eligible fail to enroll. This paper examines the extent to which pension-eligible individuals, and their families, make optimal pension decisions. Families are involved in the NRPS decisions because, in most cases, adult children need to enroll as a prerequisite of their parents’ receipt of benefits. We examine the decisions of both those eligible for pension benefits (i.e. over 60 years old) and their adult children. We use the rural sample of the 2012 China Family Panel Study to study determinants of the decision to enroll in NRPS, premiums paid, and time taken to enroll. We find evidence of low and suboptimal pension enrollment by eligible individuals and their families. Suboptimal enrollment takes various forms including failure to switch from the dominated default pension program to NRPS and little evidence that families make mutually beneficial intra-family decisions. For the older cohort, few individual and family characteristics are significant in enrollment decisions, but village characteristics play an important role. For the younger cohort, we find that more individual-level characteristics are significant, including own and children’s education. Village characteristics are important but not as much as for the older cohort.

Suggested Citation

Chen, Xi and Hu, Lipeng and Sindelar, Jody L., Leaving Money on the Table? Suboptimal Enrollment in the New Social Pension Program in China (November 2017). NBER Working Paper No. w24065. Available at SSRN: https://ssrn.com/abstract=3082227

Xi Chen (Contact Author)

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Yale University - Department of Economics ( email )

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Lipeng Hu

Peking University - National School of Development ( email )

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Jody L. Sindelar

Yale University - School of Public Health ( email )

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National Bureau of Economic Research (NBER)

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