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

Xi Chen, Lipeng Hu and Jody L. Sindelar ()
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Lipeng Hu: Peking University
Jody L. Sindelar: Yale University

No 12843, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: Family Binding Policy; intergenerational arrangements; intra-family decisions; suboptimal choices; social pension; default option (search for similar items in EconPapers)
JEL-codes: J14 J18 R23 R28 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2019-12
New Economics Papers: this item is included in nep-age, nep-cna and nep-tra
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Published - published in: Journal of the Economics of Ageing, 2020, 15, 100233

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Related works:
Journal Article: Leaving money on the table? Suboptimal enrollment in the new social pension program in China (2020)
Working Paper: Leaving Money on the Table? Suboptimal Enrollment in the New Social Pension Program in China (2017)
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