Public Pension Reforms in China

Preface
Contents
Editor and Contributors
Abbreviations
List of Figures
List of Tables
1 Introduction
1.1 Background and Aim of This Book
1.2 Main Contents of This Book
1.3 Significance
Notes
References
Part I Institutional Transitions and Issues on Public Pensions in China
2 Public Pension Reforms in China: Process and Institutional Contents
2.1 Introduction
2.2 Process and Contents of Public Pension Reforms in China
2.2.1 The EBPI Reform
2.2.2 The Establishment of the NRSPI and URSPI Schemes
2.3 Classifications of  Pensions in China Based on International Typologies
2.3.1 Classification Based on World Bank Typologies
2.3.2 Classification Based on OECD Typologies
2.4 Situations of Chinese Public Pensions in the Current Period
2.4.1 The Expansion of the Coverage Rate
2.4.2 Pension Benefit Eligible Age and Mandatory Retirement Age
2.4.3 Assessing Benefit Levels
2.4.4 Low Coverage Rate of the EBPI Among Migrants
2.5 Issues in Public Pension Systems in China
2.6 Conclusion
Notes
References
3 Towards a Universal Chinese Future Public Pension Structure: Re-engineering the Social Pension Scheme to Become a Guarantee in the Earnings-Related Pension Scheme
3.1 Introduction
3.2 The Basic Philosophy of Universal and Mandatory Public Pensions in the Perspective of China’s Pension System
3.3 International Comparisons of the Total Benefit Expenditures and Government Subsidies
3.3.1 China’s Expenditures on Old-Age Pension Benefits Compared with Germany and Japan
3.3.2 The Relative Scale of Government Subsidies for China is Already Higher Than Japan’s
3.4 Differences in the Objectives of Government Subsidies and the Benefit Gaps Across Sectors Between Japan and China
3.4.1 The Difference in the Objectives of Government Subsidies
3.4.2 The Benefit Gaps Across Sectors
3.5 China’s Public Pension Scheme is Distributionally Regressive
3.5.1 Benefit Gaps Are Much Larger Than the Earnings Gaps Across Sectors in China
3.5.2 China’s Public Pension Benefits Are Extremely Unequal
3.5.3 China’s Gini Coefficient for the Disposable Income of the Elderly is Much Higher Than for Economically Developed Countries
3.6 The Official Replacement Rate for China Needs to Be Revalued Using a Full-Scale Economy Average Wage
3.6.1 Valuation of the Full-Scale Economy Average Wage
3.6.2 Revaluation of the Replacement Rate of the EP Scheme Using the Full-Scale Economy Average Wage
3.6.3 Replacement Rate of the EP Scheme Without Government Subsidies
3.7 How Subsidies and Benefit Expenditures of the EP Scheme Can Become Better Aligned with Actual Needs
3.8 How to Finance an Increase of Social Pension Benefits
3.9 Conclusions
Notes
References
4 Interest Rate Difference Loss of the Individual Account in Employees’ Basic Pension Insurance
4.1 Introduction
4.2 Literature Review
4.2.1 Literature on the Inheritance Provision of Individual Accounts and the Fund Gap
4.2.2 Literature on the Annuity Divisor of Individual Accounts and the Fund Gap
4.2.3 Literature on the Individual Account Fund Gap and the RRR and BIR of the EBPI Fund
4.2.4 Literature on the Individual Account Reform and EBPI Fund Gap
4.3 Model and Simulation
4.3.1 Concept
4.3.2 Parameters
4.3.3 Actuarial Model and Numerical Simulation
4.4 Sensitivity Analysis of the IRDL Under Different Reform Plans
4.4.1 Sensitivity Analysis of the IRDL Under Different BIRs and RRRs (Reform Plan 1)
4.4.2 Sensitivity Analysis of the IRDL Under the Annuity Divisor According to the Average Life Expectancy at Retirement (Reform Plan 2)
4.4.3 Sensitivity Analysis of the IRDL Under the Annuity Divisor According to the Limiting Age (Reform Plan 3)
4.4.4 Sensitivity Analysis of the IRDL Under the Benefit Payment Ceiling Rule (Reform Plans 4 and 5)
4.5 Conclusion
Note
References
5 Issues on Increasing the Contribution Rate of the Funded Defined Contribution
5.1 Introduction
5.2 Can the Mutual Help Function of Chinese Public Pensions Be Weakened?
5.2.1 The Function of Redistribution of Chinese Public Pensions Cannot Be Weakened
5.2.2 Expanding Individual Accounts Must Result in Further Expending Income Inequality
5.2.3 There is no Reason to Expand Funded Individual Accounts Currently in China
5.2.4 Understanding the Swedish Public Pension Scheme Completely
5.3 Issues on the Effects of Individual Accounts
5.3.1 Chile’s Type of Funded Individual Accounts Have Failed to Increase Incentives
5.3.2 Transparency in Public Pensions Has Nothing to Do with the Scale of Individual Accounts
5.3.3 Should the Inheritance Right of the Expanded Individual Accounts Be Cancelled?
5.3.4 Competitiveness of Labor Markets Should not Be Directly Applied to Retirees
5.4 The Global Trend of Public Pension Reform: Issues on  Privatization
5.4.1 Most OECD Countries with Earnings-Related Public Pensions Have Maintained PAYG DB Model
5.4.2 No One Developed Country Has Adopted the Chilean Model and Most of Developing Countries Has Reversed
5.4.3 Sweden Model is NDC not FDC
5.5 Issues on the International Comparisons on Population Ageing
5.5.1 Population Ageing of the US and the World Average is not a Representative of the World
5.5.2 All Older Developed Countries Have Refused Chilean Pension Model
5.6 Conclusions
Notes
References
6 Financial Sustainability and Adequacy Issues on Social Security Pensions
6.1 Introduction
6.2 Fundamental Characteristic of Social Security Pensions
6.3 Need for Periodic Actuarial Evaluations
6.4 Policy Options for Ensuring Financial Sustainability
6.4.1 Major Options
6.4.2 Other Options
6.4.3 Some Remarks
6.5 Pension Adequacy
6.5.1 Defining Pension Adequacy
6.5.2 Other Factors Governing Pension Adequacy
6.5.3 Relationship to Poverty Alleviation
6.5.4 Challenges Ahead
6.6 Conclusions
Notes
References
Part II Impacts of Public Pensions on Households or Firms’ Behaviours in China
7 Public Pension and Regional Disparity in Household Consumption
7.1 Introduction
7.2 Literature Review
7.2.1 Economics Theory and Hypotheses on the Relationship Between Pension and Household Consumption
7.2.2 Empirical Studies on the Relationship Between Pension and Consumption
7.2.3 Two Channels of the Relationship Between Pension and Regional Consumption Disparity
7.3 Methodology
7.3.1 Model
7.3.2 Data and Variable Setting
7.4 Results of Descriptive Statistics
7.5 Results of Econometric Analysis
7.5.1 Basic Results
7.5.2 Estimations by Region Group
7.5.3 Decomposition Results on Regional Consumption Disparity
7.6 Conclusions
Appendix
Notes
References
8 New Rural Social Pension Insurance Scheme and Non-agricultural Employment of Rural Older Adults
8.1 Introduction
8.2 The New Rural Social Pension Insurance Scheme Reform in Rural China
8.3 Literature Review
8.3.1 Channels for the Effects of Pension on Labor Force Participation
8.3.2 Empirical Studies on the Effects of Pension on Labor Force Participation
8.4 Method
8.4.1 Model
8.4.2 Data
8.4.3 Variable Setting
8.5 Descriptive Statistics Results
8.6 Econometric Analysis Results
8.6.1 Basic Results
8.6.2 Results by Heterogenous Group
8.7 Conclusions
Notes
References
9 Public Pension and Household Financial Asset Allocation
9.1 Introduction
9.2 Literature Review
9.3 Methodology
9.3.1 Model
9.3.2 Data and Variables
9.3.3 Data Variable Setting
9.4 Results
9.4.1 Basic Results of Probability of Holding Risky Financial Assets
9.4.2 Basic Results of Share of Risky Financial Assets
9.4.3 Results by Type of Risky Financial Assets
9.4.4 Considering Heterogeneous Groups
9.5 Conclusions
Appendix
Notes
References
10 Public Pensions and Income Transfer Between the Elderly and Their Children
10.1 Introduction
10.2 Literature Review
10.2.1 Empirical Studies on the Issues
10.2.2 Effects of Pensions on Intrahousehold Income Transfer and Hypotheses Development
10.3 Methodology
10.3.1 Model
10.3.2 Data
10.3.3 Variable Setting
10.4 Results of Descriptive Statistics
10.4.1 Differences in the Change of Income Compositions of the Elderly Between the Treatment and Control Groups
10.4.2 Changes in Income Composition of the Elderly Pensioners in Two Periods
10.5 Econometric Analysis Results
10.5.1 The Effects of Pensions on Net Transfer Income of the Rural Elderly
10.5.2 Effects of Amount of Pension Benefits on Net Transfer Income of the Rural Elderly
10.5.3 Heterogenous Effects of Pensions by Groups
10.6 Conclusion
Notes
References
11 Seniority Wage, Mandatory Retirement and Employment of Older Workers
11.1 Introduction
11.2 Literature Review
11.2.1 Lazear Model on Seniority Wage and Implementing Mandatory Retirement System
11.2.2 Empirical Studies on Seniority Wage and Employment of Older Workers
11.3 Methodology
11.3.1 Model
11.3.2 Data
11.3.3 Variable Setting
11.4 Results of Descriptive Statistics
11.4.1 Age-Wage Profile in Chinese Firms
11.4.2 Situations for Implementing a Mandatory Retirement System in Chinese Firms
11.5 Results and Discussions of Econometric Analyses
11.5.1 Does Seniority Wage Influence the Probability of Implementing Mandatory Retirement System in Chinese Firms?
11.5.2 Heterogeneous Effects by Group
11.6 Conclusions
Appendix
Notes
References
Part III Impacts of Public Pensions on Well-being in China
12 Public Pension and Health Among Rural Middle-Aged and Older Adults
12.1 Introduction
12.2 Methodology
12.2.1 Data
12.2.2 Variable Setting
12.2.3 Model
12.3 Results
12.3.1 Descriptive Analysis
12.3.2 Regression Analysis
12.4 Discussions
12.5 Conclusions
References
13 The Determinants of Well-Being of Older Adults Based on the Capability Approach
13.1 Introduction
13.2 Theoretical Framework: A Capability Approach
13.3 Methodology
13.3.1 Model
13.3.2 Data
13.3.3 Variable Setting for the Utilization Ability Estimations
13.3.4 Variable Setting for the Functioning Estimations
13.4 Results
13.4.1 The Determinants of Utilization Ability: Testing Results of H1
13.4.2 The Determinants of Utilization Ability by Rural and Urban Residents: Testing Results of H2
13.4.3 The Influence of Utilization Ability on Chinese Older Adults Functioning: Testing Results of H3
13.4.4 The Influence of Utilization Ability on Functioning for the Rural and Urban Residents: Testing Results of H4
13.5 Conclusions
Appendix
Notes
References
14 Public Pension and Subjective Well-Being Among Rural Middle-Aged and Older Adults
14.1 Introduction
14.2 Literature Review
14.2.1 Channels of Association Between Public Pension and SWB
14.2.2 Empirical Studies on the Association Between Public Pension and SWB
14.3 Methodology
14.3.1 Models
14.3.2 Data and Variables
14.3.3 Variable Setting
14.4 Results
14.4.1 Basic Results
14.4.2 Heterogeneous effects by Group
14.5 Conclusions
Appendix
Notes
References
Index