How Well Do Children Insure Parents Against Low Retirement Income? An Analysis Using Survey Data from Urban China

Abstract

As population aging becomes more pronounced in the developing world, the uneven implementation of social safety nets raises important questions as to how well traditional family-based mechanisms insure elderly incomes when pension systems fail. Using a unique dataset from a recent household survey conducted in urban China, we find evidence that private transfers respond to low household income of retired workers when income falls below the poverty line. This finding is consistent with an altruistic motive for transfers at low levels of household income. At the same time, however, the transfer reponse to elderly pre-transfer income is not sufficient to fully cover shortfalls that arise with severe pension arrears and low retirement income.