Tens of millions of older Chinese have been struggling with poverty and loneliness as their children flee villages to cities. Sharp demographic changes such as rapid aging and increasing dependency ratio due to the one-child policy, as well as the recent trend of rural-to-urban migration as a result of urbanisation
have frayed the ties that once bound the nation’s families together. The left-behind elders have to live off their labour and remittances from their migrant children.
In fighting for the exacerbated old-age poverty in the rural areas, China launched the New Rural Pension Program (NRPP) in 2009, covered more than 300 million Chinese by the end of 2012. Unlike the pension programs in the developed areas, the NRPP could be considered as a conditional cash transfer program, where the conditions are minimal: being registered as rural residents, and age 60 or above.
This article focuses on answering the following questions:
- does the public cash transfer program (NRPP) crowd out the private transfers that the rural elders have been receiving?
- how does the NRPP affect the spending patterns of the rural elders in transfers sent to others, consumption, investment in productive assets and nancial assets? What could be the motivation behind the behavioral responses to such a cash transfer program?
Using a regression discontinuity design with the program policy and a rich rural survey dataset, this research nds that the NRPP decreases both the probability and the amount of private transfers received by the rural elders, which indicates a strong crowding-out effect. Also, the NRPP has no signi cant impact on the rural elders’ consumption, investment in assets, loans and debts. However, the NRPP significantly increases the amount of transfers sent to children from the elders, and at the same time, the amount of transfers sent to the elders’ siblings decreased. The results of household and individual fixed-effect analyses reveal that the elders tend to transfer more to the more educated children, and also to those who migrated to a more distant region with a higher administrative level. These findings could be reconciled with an investment motive of the Chinese rural elders, who are treating their migrant children as “productive assets” that have higher returns than the productive capitals in the rural areas where the financial inclusion level is low.