Intra‐family Income Redistribution and Its Dynamic Changes among the Elderly in China: 2002–2018

• Published date: 01 September 2021
• Author: Hanrui Jia,Peng Zhan
• Date: 01 September 2021
• DOI: http://doi.org/10.1111/cwe.12385

©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 84–104, Vol. 29, No. 5, 2021

84

*Hanrui Jia, PhD Candidate, Business School, Beijing Normal University, China. Email: jhrnanjing@foxmail.

com; Peng Zhan (corresponding author), Research Fellow, Institute for Common Prosperity and Development,

Zhejiang University, China. Email: zhanpeng@zju.edu.cn. This research was supported by the National

Social Science Foundation of China (No. 18ZDA080), the Jiangsu Natural Science Foundation of China (No.

BK20190788), and the Fundamental Research Funds for the Central Universities.

Intra-family Income Redistribution and Its Dynamic

Changes among the Elderly in China: 2002–2018

Hanrui Jia, Peng Zhan*

Abstract

This paper studies the impact of household income redistribution on income inequality

among the elderly from 2002 to 2018. It defi nes shared income and measures how each

family member’s contributions affect income inequality among the elderly. The study

has three major fi ndings. First, from 2013 to 2018, the role of household shared income

in reducing income inequality among the elderly increased. Second, the proportion of

shared income contributed by children was the highest overall, reaching 11.0 percent

nationwide and even 17.9 percent in rural areas in 2018. The contribution of shared

income to inequality was also higher among the rural elderly. Grandchildren under

16 largely received shared income from the elderly, and the income transferred by the

male elderly to their wives was obvious. Third, changes in family structure narrowed the

inequality gap among the elderly in the periods 2002–2013 and 2013–2018.

Key words: family structure, income inequality for the elderly, inequality decomposition,

intra-family income redistribution

JEL codes: D13, H31, I31, J14

I. Introduction

As the ageing population becomes increasingly large, income security for the elderly

in China has presented enormous challenges. Since the end of the last century, China

has gradually established a multi-level old-age security system involving mechanisms

such as the Urban Employee’s Basic Pension Scheme and the Residents’ Social Pension

Schemes in both rural and urban area. However, there are still problems such as a

low replacement rate, unbalanced levels of protection, and insufficient sustainability

(Feng and Fang, 2018). To guarantee the quality of life of the elderly, the World Bank

©2021 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Intra-family Income Redistribution and Its Dynamic Changes 85

proposed a five-pillar plan (Li, 2017). Coupled with the actual functioning of intra-

family transfer payments, China’s multi-level old-age income security system is similar

to the five pillars. The multi-pillar old-age security system emphasizes the positive

effects of families’ responses to the aging population. In reality, family security has

indeed played an important role in securing the livelihoods of the elderly. This reliance

on family security has resulted from the low and declining labor participation rate of the

elderly (Qu, 2014), the reduction in labor income, and insufficient pension insurance

benefits to meet the needs of the elderly. According to the sixth census in 2010,

40.72 percent of China’s population aged 60 and over were being supported by other

family members (PCOSC and DPES, 2012). Thus, from the perspective of income

distribution, income redistribution plays a decisive role in family security.

Income redistribution can change the ability of individuals to cope with risks, to

deal with economic restrictions, to ensure smooth consumption, and to reduce life-

cycle income gaps (Benabou, 2000). Income redistribution within the family can affect

the risk diversifi cation ability of the entire family, thereby affecting the overall income

gap (Schultz, 1982; Martin, 2006; Maia and Sakamoto, 2016). If the income gap within

the household is ignored and only the income gap between families is considered, the

total income gap would be underestimated (Haddad and Kanbur, 1990; Lise and Seitz,

2011; Malghan and Swaminathan, 2016). Previous studies on redistribution within the

family have mainly focused on the impact of changes in family structure on the income

gap between families, poverty in the elderly, and elderly care issues. Of these studies,

research on the impact of household redistribution on income inequality has focused

on how changes in family structure affect residents’ income and income inequality (Qi

and Niu, 2012; Luo and Yan, 2020). Some studies have found that intergenerational

relationships, and family support significantly affect poverty among the rural elderly

(Zimmer and Kwong, 2003; Yu et al., 2019; He et al., 2020). Most studies highlighted

the impact of family population size on the income security of the elderly. However, Lee

and Xiao (1998) believe that the impact of the family population size on the elderly is

exaggerated. The fi nancial support that the elderly receive from their children mainly

depends on their needs, not the number of household members.

In China, the implementation of the one-child policy has brought about tremendous

changes in the family structure, which have primarily manifested in the shrinking of

family size and ageing of family members on average (Peng and Hu, 2015). Changes in

the family structure will, to a small extent, change the redistribution of resources within

the family, which in turn affects overall income inequality (Schultz, 1982; Martin,

2006; Maia and Sakamoto, 2016). There have been many studies on the income gap