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

37 Pages Posted: 31 Dec 2019

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)

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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 Studies 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 evidence that families do not 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, 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. Our finding of suboptimal enrollment is important as it highlights the need for policies to improve enrollment. This paper provides needed information on the extent of the factors relating to suboptimal enrollment.

Keywords: social pension, suboptimal choices, intra-family decisions, intergenerational arrangements, Family Binding Policy, default option

JEL Classification: J14, J18, R23, R28

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. IZA Discussion Paper No. 12843. Available at SSRN: https://ssrn.com/abstract=3510455

Xi Chen (Contact Author)

Department of Health Policy and Management ( email )

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Yale University - Department of Economics ( email )

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Yale University - Yale Institution for Social and Policy Studies ( email )

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HOME PAGE: http://isps.yale.edu/team/xi-chen

IZA ( email )

Lipeng Hu

Peking University - National School of Development ( email )

Beijing, 100871
China

Jody L. Sindelar

Yale University - School of Public Health ( email )

PO Box 208034
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New Haven, CT 06520-8034
United States
203-785-5287 (Phone)
203-785-6287 (Fax)

National Bureau of Economic Research (NBER)

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