Intergenerational transfers and well-being in old age in contemporary urban and rural China
Keywords: China
Intergenerational transfers
Pensions

China is entering a new historical era that has as its demographic hallmark an ageing population. The fact that China is ageing before it becomes a modernised, wealthy country, presents serious challenges, one of the most direct and important of which relates to support for older members of society. This thesis concerns the way in which different factors affect intergenerational transfers from adult children to their old parents, with particular focus on living arrangements and parental income. The core question this thesis aims to address is: If public transfers increase, would this crowd out private transfers? The results of the estimated association between living arrangements and intergenerational transfers are also used to improve the robustness of the test of crowding-out effect. This study is based on empirical analyses of two waves of nationally representative datasets, covering adult individuals aged 60 and over from 20 provinces in urban and rural China.
Living arrangements are vital to intergenerational transfers and welfare in old age, especially in China where the family-based support mechanism by which the young cared for the old was traditionally through coresidence. The descriptive statistics show that though coresidence is still the predominant living arrangement in rural areas, older Chinese people are increasingly less likely to co-reside with children. Such changes in living arrangements, however, do not leave older people isolated over time. Investigation of the determinants of older people’s coresidence decisions shows that older people with more financial or instrumental needs are more likely to live with children. Analysis of the determinants of parents’ living distance from children finds that in urban areas, old parents with higher pensions are more likely to live far away from children, although insignificant effects are found for rural samples. Finally, this study finds weak evidence that parents living far from children receive more intergenerational transfers.
Overall, it has been found that family support, including intergenerational monetary transfers, is still prevalent in China; particularly in rural areas. Although a pattern of declining intergenerational transfers began to emerge during the period between 2000 and 2006, the family unit, and traditional family support, appear likely to remain an essential pillar of security in old age. Through the use of a variety of quantitative methodologies this thesis is able to provide robust estimates of how the increase in public programmes is influencing private transfers in China. Analysis of the factors that determine the incidence of receipt of transfers from children suggests that intergenerational transfers in China tend to target old parents that are in greater financial need. Moreover, the analysis of determinants of the size of transfer suggests that although altruism and exchange motives co-exist, the exchange motive dominates inter-generational transfers in urban China. This study does not find statistically significant estimates of transfer derivatives for older people in rural areas. The emerging pattern of support for older people indicates the pursuit of a new balance between formal and informal support. This thesis argues that a gradual increase in public transfers will not crowd out private transfers, and, in cities, may actually strengthen private transfers.