Who Benefits from Public Old Age Pensions? Evidence from a Targeted Program

Abstract

Given the aging of the population, policies relating to the design and reform of public pension programs are prominent in policy debates. For many developing countries, a major concern centers around the possible displacement of traditional family-based support by public programs. One challenge in estimating this displacement, or crowding out, is the endogeneity of social security benefits-the incidence and size of benefits may be correlated with unobserved determinants of private transfers, especially if benefits are means tested. Using two rich data sets, this article explores the impact of the Taiwanese Farmers' Pension Program (FPP) on recipients and their noncohabiting adult children. The FPP is targeted at elderly farmers and has relatively clean, exogenous rules for eligibility that allow the endogeneity problem to be addressed. Estimates from multiple identification strategies consistently imply that 1 dollar of pension crowds out 30-39 cents of private transfers received by the elderly. Mirroring these results, the pension also reduces the probability that the recipients' children make transfers to their parents. Further, the pension increases both the recipients' and their children's consumption, thus providing direct evidence of an improvement in the well-being of pensioners' offspring. (c) 2010 by The University of Chicago. All rights reserved..

How Public Pension affects Elderly Labor Supply and Well-being: Evidence from India

“…3 Researchers have studied the effect of pension in South Africa on elderly living arrangements (Edmonds, Mammen, and Miller, 2005), on the redistributive and behavioral aspects of transfers (Case and Deaton, 1998;Duflo, 2000), and labor supply of prime-age adults (Ardington, Case, and Hogegood, 2009;Bertrand, Mullainathan and Miller, 2003;Psel, Fairburn, and Lund, 2006). Fan (2010) has investigated the effect of Farmer's Pension Program in Taiwan on private transfers, Glomm et al (2005) studied the effect of public pension in Brazil on capital Banerjee and Duflo (2007) create a proxy measure of longevity -the probability that an adult's mother and father are alive and find that mothers of the non-poor are more likely to be alive than mothers of the poor, inferring thereby that poverty kills. Pal and Palacios (2011) find elderly poverty rate in India to be lower in districts with lower average per capita expenditure, which they attribute to "survivorship bias" -meaning that the elderly have lower survival in high poverty districts.…”

The Effects of a Noncontributory Pension Program on Labor Force Participation: The Case of 70 y Más in Mexico

“…8 Other mechanisms through which non-contributory pensions end up benefiting younger individuals are the nutrition and schooling and children (Duflo 2003, Edmonds 2006, Gutierrez and Rubli 2011 and family transfers (Jensen 2004, Juárez 2009, AmuedoDorantes and Juárez 2012, Fan 2010.…”

Do public pensions crowd out private transfers to the elderly?: evidence from South Korea

“…As a result, Cox and Jimenez (1995) conclude that public programs to alleviate elderly poverty would not have their full impact because those programs partially crowd out private transfers. On the other hand, Fan (2010) provides evidence indicating that increases in pensions improve the expenditures of pensioners as well as their children. Studying whether pension income is used differently compared to other income, Case and Deaton (1998) suggest that pension and other income contribute equally to food expenditures by the elderly although they acknowledge some weaknesses in their model's identification strategy.…”