Examining the Impact of Taiwan’s Cash Allowance Program on Private Households

The Effect of Social Entitlement Programmes on Private Transfers: New Evidence of Crowding Out

“…Our point estimates of the crowding‐out effect on the intensive margin suggest almost complete crowding out, but are not measured precisely. These results are somewhat consistent with Lai and Orsuwan (), which suggests that a dollar of public transfers significantly crowds out about 30–50 cents of private transfers among low‐income households in Taiwan. Our results also suggest that the crowding‐out effect is different across various subsamples of our data, as private transfer behaviour is less sensitive to public transfer status for male and higher‐educated respondents.…”

“…Like Jensen (), Lai and Orsuwan (), and Juarez (), this study uses an exogenous policy change to identify the crowding‐out effect of public redistribution programmes on private transfer payments to the elderly. But in our opinion, this paper has some advantages over the previous literature.…”

“…His estimates imply that a one dollar increase in pension income leads to a 25-30 cents reduction in private transfers received from children. Lai and Orsuwan (2009) evaluate the crowding-out effect of the social welfare programme Living Allowance for Mid-or Low-Income Elders, implemented in 1993 and targeted at relatively poor senior citizens in Taiwan. Using cross-sectional data and a differences-in-differences identification strategy, they find that a one dollar increase in public transfers reduces private transfers by 30-50 cents.…”

“…She uses an IV Tobit regression specification to estimate the effect, and finds strong evidence of crowding out (an additional peso of income reduces total cash transfers by 86 cents). 3 Like Jensen (2004), Lai andOrsuwan (2009), andJuarez (2009), this study uses an exogenous policy change to identify the crowding-out effect of public redistribution programmes on private transfer payments to the elderly. But in our opinion, this paper has some advantages over the previous literature.…”

The Effect of Social Entitlement Programs on Private Transfers: New Evidence of Crowding Out

“…The estimated marginal effect is statistically significant at the 1% level 17 A less important consideration is whether the Allowance program is correlated with the income of seniors (which we do not observe) based on income eligibility requirements. If so, then our instruments would be less powerful as a smaller fraction of the elderly Taiwanese population would qualify for the program.…”