Does old-age security promote rural residents' consumption? A decomposition based on contribution and replacement rates

Weimin Zhao and Na Chen

Economic Analysis and Policy, 2024, vol. 82, issue C, 817-830

Abstract: Vulnerable groups have low income and face borrowing constraints. What is the effect of pension security on lifelong consumption? Since 2011, China has been piloting old-age security among rural residents, which provides opportunities to study this issue. We numerically simulate the impact of old-age security on rural residents' consumption based on the overlapping generations framework and empirically test the findings. The empirical results show that pension security increases per capita expenditure during the working and retirement periods by 2.04% and 0.91%, respectively. The current excessively high average payment rate (exceeding the numerical simulation threshold of 0.1) has a negative moderating effect on the two consumption periods. The replacement rate, which primarily exhibiting a wealth effect, positively moderates consumption in both periods. Our research has theoretical and practical implications for optimizing social security and promoting welfare among low-income groups.

Keywords: Pension security; Rural consumption; Overlapping generations model; Numerical simulation; Instrumental variable (search for similar items in EconPapers)
JEL-codes: C5 D9 G2 H4 I3 Q1 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0313592624000985
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:82:y:2024:i:c:p:817-830

DOI: 10.1016/j.eap.2024.04.017

Access Statistics for this article

Economic Analysis and Policy is currently edited by Clevo Wilson

More articles in Economic Analysis and Policy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().