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Why is inequality higher among the old? Evidence from China

Katja Hanewald, Ruo Jia and Zining Liu

China Economic Review, 2021, vol. 66, issue C

Abstract: This paper studies income inequality in old age and its development over the life cycle. We 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 4000 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 fragmented Chinese public pension system.

Keywords: Inequality; Decomposition; Urban-rural gap; Pensions; China (search for similar items in EconPapers)
JEL-codes: H55 J26 O15 P36 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:66:y:2021:i:c:s1043951x21000109

DOI: 10.1016/j.chieco.2021.101592

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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