Richer and Healthier? Social Pensions and Unhealthy Consumption Behavior in China

Xiaobing Wang, Xinyuan Lei, Yanjun Ren and Jianyu Yu

Economic Development and Cultural Change, 2024, vol. 73, issue 1, 381 - 422

Abstract: Based on a life-course utility model that incorporates healthy and unhealthy, short-run and long-run consumption behavior of consumers, this study examines the unintended impact of social pensions on the smoking behaviors of the rural elderly and its underlying channels. Using China’s New Rural Pension Scheme as a policy experiment, our empirical identification rests on nonparametric fuzzy regression discontinuity to address the endogeneity problem of receiving a pension. Overall, the results indicate that receiving a pension decreases the probability of smoking and the number of cigarettes smoked. We demonstrate that the most important channel is the increase in income following the pension transfer, which makes consumers value future utility more, instead of substituting smoking with food, which is healthier. The positive health impact of social pensions is more salient for elderly individuals who are relatively poor or who have a longer life expectancy.

Date: 2024
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