Why is Inequality Higher Among the Old? Evidence from China
ARC Centre of Excellence in Population Ageing Research (CEPAR) Working Paper No. 2019/10
59 Pages Posted: 17 Aug 2019
Date Written: August 13, 2019
This paper studies income inequality in old age and its development over the life cycle. We develop a theoretical framework and a new empirical method to show that income is more unequally distributed in old age than in working age. We combine the regression-based inequality decomposition method and the three-step mediating effect test to analyze the transmission of income inequality from initial socioeconomic differences to income inequality in old age. Our study is based on a panel of over 4,000 old households from the China Health and Nutrition Survey during 1991-2015. We find that the urban-rural gap and educational inequality are the primary causes of old-age income inequality. The effect of the urban-rural gap is partially mediated by educational inequality. Inequality accumulates with age and is reinforced in old age by the Chinese public pension system, which is fragmented by occupational sector.
Keywords: Inequality, Decomposition, Urban-rural gap, Pensions, China
JEL Classification: H55, J26, O15, P36
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