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«D I R E C T I O N S I N D E V E LO P M E N T Human Development Public Disclosure Authorized The Elderly and Old Age Support in Rural China Challenges ...»

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Given this situation, exploring the sources of support for the rural elderly and the extent to which they can be expected to improve their lot over time—or, at a minimum, not contribute to its deterioration—is Poverty and Vulnerability among China’s Rural Elderly 41 important. The following chapter looks in detail at sources of support among the rural elderly, both support from their own earnings and formal and informal sources of support other than their own work.


1. The estimates are based on the China Health and Nutrition Survey (CHNS), which is a panel data set containing the same households and individuals from 1991 through 2006. Because it does not have a good measure of total consumption, income was used to measure the poverty head count, and a household is considered to be poor if it earns less than the basic needs line (875 renminbi [RMB] in 2000 yuan). Because incomes in rural China are quite volatile, poverty rates calculated using income overstate the share of households below the poverty line; 2006 is not included because pension income was not enumerated that year, and one cannot calculate a consistent measure of income.

2. The CURES is a national representative survey that collects information on the living status and well-being of urban and rural elderly in 20 provinces.

3. The poverty severity index is Foster, Greer, and Thorbecke (1984), using a sensitivity parameter of 2.

4. For the early period, the households are grouped by age of the household head in 1993, and for the later period, by age of the head in 2000.

5. Research on consumption smoothing in China has found that households that are reasonably well-off are also capable of smoothing the effects of income shocks on consumption, whereas poorer households do less well. See Jalan and Ravallion (1999) and Giles (2006).

6. The analysis decomposes the variances of log income and poverty status to show how much of the variance is explained by village location. See Cai, Giles, and Wang (2009) for details of the calculation used in this book.

7. Although location actually explains less variation in income and poverty in 2004 than in 1993, in a fully integrated economy the contribution of location to variation in income is typically considerably lower. Benjamin and others (2008) note that within-province income inequality explains 98.5 percent of income inequality in Canada, and thus the contribution of geography to income inequality (or poverty) remains much greater in China. In other developing countries, such as India, which lack nationally integrated labor markets, one might expect that geography contributes substantially more to the probability of falling into poverty.

8. For evidence on the relationship between migration and incomes, see Du, Park, and Wang (2005) and de Brauw and Giles (2008). For a discussion of migration and risk coping, see Giles (2006) and Giles and Yoo (2007).

42 The Elderly and Old Age Support in Rural China

9. Subsequent mortality was viewed as a more reliable proxy for health status than self-reported health in early research on retirement decisions in the United States. See, for example, Anderson and Burkhauser (1985), Hurd and Boskin (1984), and Parsons (1980). Giles and Mu (2007) make use of subsequent mortality as a measure of health status in a paper examining whether parent illness affects the migration decision of adult children.

10. To do this, binary response models were estimated in which the outcome is equal to one if household income per capita falls below a basic needs poverty line (875 RMB per capita in year 2000 RMB yuan).

11. Technical difficulties complicate identifying this effect using a probit model, but the interaction term has been examined in a linear probability model.

References Anderson, Kathryn H., and Richard V. Burkhauser. 1985. “The Retirement-Health

Nexus: A New Measure of an Old Puzzle.” Journal of Human Resources 20 (3):


Benjamin, Dwayne, Loren Brandt, and John Giles. 2005. “The Evolution of Income Inequality in Rural China.” Economic Development and Cultural Change 53 (4): 769–824.

Benjamin, Dwayne, Loren Brandt, John Giles, and Sangui Wang. 2008. “Income Inequality during China’s Economic Transition.” In China’s Great Economic

Transformation, ed. Loren Brandt and Thomas Rawski, 729–75. Cambridge:

Cambridge University Press.

Cai, Fang, John Giles, and DewenWang. 2009. “The Well-Being of China’s Rural Elderly.” Background Paper for East Asia Social Protection Team, World Bank, Washington, DC.

Chaudhuri, Shubham, and Gaurav Datt. 2009. From Poor Areas to Poor People:

China’s Evolving Poverty Agenda, an Assessment of Poverty and Inequality in China, Washington, DC: World Bank.

CHNS (China Health and Nutrition Survey). Various years. China Center for Disease Control and Prevention and the Carolina Population Center, University of North Carolina at Chapel Hill. http://www.cpc.unc.edu/ projects/china.

CURES (China Urban and Rural Elderly Survey). “China Urban and Rural Elderly Survey Micro-Data, 2006” (unpublished). China Research Center on Aging, Beijing.

de Brauw, Alan, and John Giles. 2008. “Migrant Labor Markets and the Welfare of Rural Households in the Developing World: Evidence from China.” Policy Research Working Paper 4585, World Bank, Washington, DC.

Poverty and Vulnerability among China’s Rural Elderly 43 Du, Yang, Albert Park, and Sangui Wang. 2005. “Migration and Rural Poverty in China.” Journal of Comparative Economics 33 (4): 688–709.

Foster, James, Joel Greer, and Eric Thorbecke. 1984. “A Class of Decomposable Poverty Measures.” Econometrica 52 (3): 761–65.

Giles, John. 2006. “Is Life More Risky in the Open? Household Risk-Coping and the Opening of China’s Labor Markets.” Journal of Development Economics 81 (1): 25–60.

Giles, John, and Ren Mu. 2007. “Elderly Parent Health and the Migration Decision

of Adult Children: Evidence from Rural China.” Demography 44 (2):


Giles, John, and Kyeongwon Yoo. 2007. “Precautionary Behavior, Migrant Networks, and Household Consumption Decisions: An Empirical Analysis Using Household Panel Data from Rural China.” Review of Economics and Statistics 89 (3): 534–51.

Hurd, Michael, and Michael Boskin. 1984. “The Effect of Social Security on

Retirement in the Early 1970s.” Quarterly Journal of Economics 99 (4):


Jalan, Jyotsna, and Martin Ravallion. 1999. “Are the Poor Less Well Insured?

Evidence on Vulnerability to Income Risk in Rural China.” Journal of Development Economics 58 (1): 61–81.

Parsons, Donald O. 1980. “The Decline in Male Labor Force Participation.” Journal of Political Economy 88 (1): 117–34.


Sources of Support among theRural Elderly

This chapter examines the sources of support among the rural elderly, comparing them with those of the urban elderly and among different subcohorts of the rural elderly. It finds that urban and rural elderly show striking differences in their sources of support. Although pension income is the most important source of support for urban households, labor income and family support remain the primary modes of support for the rural elderly. Between the ages of 60 and 70, rural household support shifts from primary reliance on labor income to primary reliance on family support. In light of the aggregate findings, the chapter then looks in more detail at the patterns of family support (including variations between rural elderly households with and without migrant adult children) and examines patterns in the labor supply of the rural elderly.

Sources of Support among China’s Elderly Major differences exist in the primary sources of support for China’s urban and rural elderly and between men and women from both groups of elderly. Table 3.1 reports findings on the elderly’s sources of support by location and gender for 2005. The differences across groups among the

elderly are striking, notably the following:

46 The Elderly and Old Age Support in Rural China

–  –  –

• Although pensions are the single most significant source of support for the urban elderly, they remain a very minor source of support for the rural elderly, almost entirely confined to former civil servants and soldiers, and former village cadres.1

• In contrast, labor income is a much more significant source of support for the rural elderly than for the urban elderly, being the primary source of support for 37.9 percent of the rural elderly.

• Family support is an important source of support for both rural and urban elderly households, but its significance among the rural elderly is substantially greater.

• As of 2005, the rural dibao was not an important source of income support for rural or urban elderly households.2 This finding may stem from the fact that the rural dibao was still being phased in at the time of the survey, although policy has shifted in the intervening period with the approval of rural dibao as national policy in 2007 and a resultant expansion in coverage.3

• Also notable is the inability of the elderly to earn income from property. In contrast to member countries of the Organisation for Economic Co-operation and Development historically, or other developing countries today, the elderly in China have not grown old in an environment in which they could accumulate land wealth. Lack of land wealth limits the ability of the elderly to earn income from rents and may also limit the scope for encouraging intergenerational transfers from their children (who would be prospective heirs).

–  –  –

remains more important for men. As shown in table 3.1, 68.5 percent of women over 60 report that financial support from family members is their most important source of support, whereas only 27.5 percent report that labor income is most important. In contrast, 48.5 percent of elderly men report that labor income remains their most important source of support; only 39.3 percent report support from family members. When distinguishing the importance of pension by gender, a significantly higher share of rural men (8.1 percent) than women (1.3 percent) report that pension income is their most significant source of financial support. The gap between men and women reflects historical differences between genders in employment in local government and the military.

Rural elderly in their sixties are more likely to support themselves through labor income, whereas those over 70 depend far more on support from family members. Table 3.2 shows results by age cohort among the rural elderly and emphasizes the differences in financial support between younger and older elderly people. Younger elderly rely more on labor income, and a shift starts after age 70. Notably, however, nearly a quarter of the elderly between 70 and 75 report labor income as their main source of support. Apart from family support and labor income, no other source of support for the elderly varies significantly by age group.

Moreover, no other component plays a particularly significant role.

Evidence on Family Support Until the last few years, policy on pensions and safety nets has not focused significantly on the rural elderly because the family was assumed to be an adequate source of support. Policy makers had assumed the continued

–  –  –

viability of traditional, family-based arrangements for two reasons. First, family values remain strong in rural areas, and Confucian filial piety continues to sustain family care for the elderly. Second, any formal public policy response to the needs of the rural elderly may undermine existing private arrangements. For example, state transfers to the elderly may crowd out existing transfers from younger family members.

With regard to the reliance on traditional family values, both policy makers and other observers have in recent years questioned the view that family support for the rural elderly will be sufficient. Fertility decline driven by China’s population policies may ultimately lead to a breakdown of the traditional support system, but conclusions from research spanning the literature on demography and economics disagree on the likeliness of this outcome. Zimmer and Kwong (2003) show that more children increase the likelihood that the elderly will receive support, but present simulation results suggest that declines in fertility alone will not lead to a collapse of family-based support for the elderly. Other research has suggested that financial transfers to parents respond to low income and low health status in urban areas (Cai, Giles, and Meng 2006), but that in rural areas interhousehold transfers are not often observed because they take the form of labor input into family farming (Lee and Xiao 1998).4 The following sections explore some of these questions empirically.

Changes to Living Arrangements and the Well-Being of the Elderly The share of rural elderly living with their children has declined rapidly, both in the long term and in recent years. Changes in living arrangements have been cited most frequently as reasons for concern for the well-being of the elderly. For example, Benjamin, Brandt, and Rozelle (2000) note that in rural northern China, over 85 percent of the elderly lived in extended households in 1935, but this figure had dropped to just over 60 percent by 1995.5 The decline in coresidence with adult children is strikingly evident over the six rounds of the China Health and Nutrition Survey (CHNS) from 1991 to 2006. Figure 3.1 shows that in the CHNS, nearly 70 percent of elderly in rural areas lived with an adult child in 1991, but by 2006 this share had fallen to just over 40 percent. As elderly parent age increases, the probability of coresidence with an adult child approaches 100 percent.6 At the same time, a decline in coresidence does not necessarily reflect a drop in provision of care to the elderly. In-kind transfers, such as supply Sources of Support among the Rural Elderly 49 Figure 3.1 Living Arrangements of China’s Rural Elderly Source: China Health and Nutrition Survey (CHNS), various years.

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